Corporate Transparency Act: What It Means For You

Updated: October 31, 2023

NEW REQUIREMENTS FOR U.S. COMPANIES STARTING JANUARY 1, 2024

The Anti-Money Laundering Act of 2020 (AMLA) established the Corporate Transparency Act (CTA). The CTA requires certain U.S. and foreign entities that are defined as reporting companies to report beneficial owners and company applicants to FinCEN (the Department of the Treasury’s Financial Crimes Enforcement Network), beginning January 1, 2024. FinCEN will establish and maintain a non-public national registry of beneficial owners and company applicants of reporting companies to prevent and combat money laundering, terrorist financing, corruption, tax fraud and other illicit activity.

As we understand the law, it is no different than providing information to the IRS. The information will not be publicly available as the law is currently written. Anonymity is almost never perfect, and it does not provide anonymity from the Government. The structure that you have created provides anonymity from the public. Additionally, anonymity is only part of what the structure offers. Limited liability is arguably the most important piece of the structure. 

Which companies are affected?
All companies incorporated with one of the 50 Secretaries of State. This includes all corporations and LLCs. It does not include most Revocable Trusts, for example Living Trusts and Land Trusts, and general partnerships (equivalent to a GbR or OHg). Also excluded are foreign companies. In addition, there are 23 other exceptions.

What does the CTA require of me?
Companies required to report must disclose all direct or indirect owners of at least 25% of the shares. In addition, such individuals who have substantial control over the company must be disclosed. This includes all officers, the board of directors, and the authorized signatories of the parent company. Names, dates of birth, place of residence and passport information (including copy of ID) are requested.

Who receives the information?
The Financial Crimes Enforcement Network ("FinCEN") at the U.S. Treasury. Access is also provided to law enforcement agencies, financial institutions, and other authorized persons, including foreign tax authorities.

What is the cost of filing the report?
FinCEN fees are not known at this time.

When does the law go into effect?
January 1, 2024

When does the report need to be filed?
Companies formed before the effective date of January 1, 2024 have until January 1, 2025 to file their reports. Companies incorporated after January 1, 2024, have 90 days.

Where is the report filed?
The filing is done electronically. The system is currently being developed by FinCEN.

Who will file this report?

Royal Legal will do this on your behalf. It will be your responsibility to report any changes to us after the initial filing so we can determine if additional reporting is required.

Royal Legal will be offering this service and will communicate next steps and any costs once FINCEN has finalized their website, filing requirements and filing process.

Is it a one-time report or does the CTA create a recurring obligation?
At this time there is no set frequency but any changes among the relevant persons must be disclosed.

What happens if I file the report late or not at all?
Violators face civil penalties of up to $500 per day. Criminally, one could face up to 2 years in prison and up to a $10,000 fine. A timely filing of incorrect information will go unpunished if corrected within 90 days of filing.

Additional Resources:

https://www.fincen.gov/boi

https://www.fincen.gov/boi-faqs

https://www.americanbar.org/groups/business_law/resources/business-law-today/2021-may/the-corporate-transparency-act/

Next Steps:

Once the government has finalized the Beneficial Ownership Information (BOI) reporting website Royal Legal will communicate next steps and any costs for this service. 

Adding Value to Increase ROI with Real Estate Investing

Adding value to an investment means enhancing its return potential, often through strategic improvements or modifications. 

Watch E66: Adding Value to Increase ROI with Paul Moore

Increasing value does not necessarily mean spending a lot of money. It is more about leveraging your existing resources and using them intelligently to improve the return potential on your property or properties. 

Keep reading to learn more about adding value to your investments to increase ROI. 

Increasing Occupancy Rates for Properties

Maintaining a high occupancy rate is crucial for profitability in the competitive world of real estate. Whether you own apartments, commercial properties, or single-family home rentals, there are strategies you can implement to attract and retain tenants. 

Understand Your Target Market

Before you can attract tenants, you need to understand who they are. What are their needs and preferences? Are they young professionals, families, or tourists? 

Optimize Your Property

Location

Location is crucial in real estate. If your property is in a prime location with easy access to shopping centers, schools, or tourist attractions, highlight this in your marketing materials.

Building Features

Ensure your property has features that appeal to your target market. It could include things like a gym, pool, or pet-friendly policies for apartment buildings, proximity to transport hubs or ample parking for commercial properties, and unique design elements or stunning views for vacation rentals.

Develop a Competitive Pricing Model

Your pricing should be competitive based on the value you're offering. When setting your prices, research what similar properties in your area are charging and consider factors like location, building features, and market demand.

Enhance Customer Satisfaction

Happy tenants renew their leases, reducing vacancy rates. Provide excellent customer service, respond to maintenance requests promptly, and consider offering incentives for lease renewals.

Justifying a Rental Rate Increase

As a property owner, there may come a time when you need to increase rents to cover rising expenses or improve your investment returns. 

Evaluate Your Current Expenses

Start by evaluating current expenses related to your property, including:

Add up these costs to determine your total monthly expenses.

Assess Your Current Rent Revenue

Compare your total monthly expenses with your current rent revenue. Consider a rent increase if your costs exceed your income or there's only a small surplus.

Consider External Factors

Location & Demand

If your property is in a high-demand area with rising rental prices, it makes sense for your rates to reflect this. Research comparable rentals in your area to ensure your proposed increase aligns with the market.

Amenities & Improvements

If you've made significant improvements to the property, such as renovations or landscaping, these can justify a rent increase. Tenants are usually willing to pay more for upgraded features and amenities.

Communicate the Increase

Once you've decided to raise rents, it's crucial to communicate this to your tenants effectively:

Decrease Operating Expenses 

Operating expenses are essential to maintaining a profitable real estate investment. However, they can also eat into your profits if not correctly managed. Here are some effective methods to decrease these expenses:

List Current Operating Expenses

The first step in managing operating expenses is to identify what they are. Typical operating expenses for a rental property include:

Identify Potential Areas of Cost Savings

Once you have a clear picture of your expenses, you can start identifying potential areas for cost reduction. Here are some suggestions:

Energy Efficiency

Implementing energy-efficient measures can significantly reduce utility costs. These could include installing LED lighting, energy-efficient appliances, and programmable thermostats.

Water Conservation

Similar to energy efficiency, water conservation measures can also reduce utility costs. Consider installing low-flow fixtures and toilets and xeriscaping where applicable.

Regular Maintenance

Regular maintenance helps avoid costly repairs. Regularly inspect your property and address minor issues before they become significant problems.

Analyze Market Trends

If rental rates rise, consider raising your rent without losing tenants. Conversely, adjust your rent to stay competitive if rates decrease.

Consider Property Management Fees

If you use a property management company, review their fees to ensure you're getting value for your money. Consider self-managing or switching to a more affordable company if their services are too expensive.

Create a Comprehensive Plan

Create a detailed plan to lower operating expenses. Outline the steps, expected cost savings, and success metrics.

Key Takeaways

Market Predictors to Identify Opportunity

Uncover the secret to successful investing in a dynamic and unpredictable economy. Dive into the world of demographics, analyzing job growth and zoning regulations. 

Find the strategy that brings excellent ROI and opens doors for first-time home buyers priced out of the market. Get ready to embark on a lucrative journey!

Watch: Market Predictors to Identify Opportunity with Charles Bulthuis

Housing Demand and Supply-Side Conditions

Understanding the balance between housing demand and supply is essential. If there's a shortage of single-family homes, this could drive up prices, creating a seller's market. Conversely, an oversupply may lead to a price drop, favoring buyers.

First-time homebuyers are currently facing significant challenges in the housing market because of the following:

How Can Real Estate Investors Benefit?

These challenges present several unique opportunities for real estate investors:

While these opportunities can provide potential profits, investors must conduct thorough research and due diligence before investing.

Population growth

Population growth has a substantial impact on the real estate market, influencing both demand and pricing. 

Increased Demand for Housing

As the population increases, the demand for housing also grows. This demand can lead to more construction projects and increased sales in the real estate market.

Changes in Home Prices

The balance between supply and demand dramatically influences home prices. A growing population can increase demand, pushing prices up, especially if the housing supply cannot keep pace.

Shifts in Demographics

Population growth doesn't just refer to numbers; it also involves shifts in demographics such as age, income, and regional preferences, which can impact the types of properties in demand. For instance, an increase in the young adult population might boost demand for rental properties or starter homes.

Impact on Commercial Real Estate

Commercial real estate can have a positive impact in areas where population growth rates are significantly above average, as more residents require services, retail outlets, and office spaces.

Age Distribution

Age distribution plays a significant role in shaping the real estate market, and different age groups have varying housing preferences. 

Changes in Housing Preferences

Millennials may prefer rentals or smaller starter homes in urban areas, while older generations may opt for larger homes in suburban areas. As the demographic makeup of the population changes, these preferences can shift, impacting the demand for different properties.

Impact on Supply and Demand

An aging population can create sustained demand for certain housing types, reducing home prices and excess housing supply at a minimum. However, if a large portion of the population is moving into retirement and downsizing, this could lead to an increased supply of larger, more expensive homes on the market.

Effect on Secondary Cities and Alternative Living

An aging population may cause increased migration to secondary cities, where the housing stock might not be sufficient. Older people might seek alternative living arrangements, such as assisted living facilities or retirement communities, influencing the demand for these properties.

Migration Patterns

Migration patterns can influence housing demand. Understanding migration patterns is crucial for real estate investors as it helps predict changes in demand and identify potential growth areas.

Demand and Supply

Whether intercity, interstate, or international, migration directly affects the demand for residential and commercial real estate. Influxes of people into an area can increase demand, potentially leading to a rise in property prices if supply cannot keep pace. Conversely, regions experiencing outmigration may see decreased demand and potentially lower property values.

Shift in Property Types

Depending on the demographic of the migrants, different types of properties might be in demand. For example, young professionals may prefer urban apartments near workplaces and amenities, while families might look for single-family homes in suburban areas with good schools.

Affordability and Lifestyle

Many people migrated during the pandemic due to the opportunity to work remotely, the desire for more space, and better affordability. These factors can cause shifts in real estate markets, with increased demand in more affordable regions or properties offering more space.

Key Takeaways

Ask An Advisor - Insurance Edition

Royal Legal Solutions Insurance Manager Aaron Porter, a seasoned expert, hosted the highly informative Ask An Advisor-themed group mentoring session. 

His presence added immense value as he enthusiastically engaged in a dynamic Q&A session, providing invaluable insights and expertise on various insurance topics.

If Fire Or Flood Destroys My House, Does The Insurance Company Pay The Homeowner And The Bank?

When a fire or flood destroys a house, the way the insurance company pays out depends on the specific terms of the homeowner's insurance policy:

How Do I File An Insurance On Behalf Of A Deceased Person?

Filing a property claim on behalf of a deceased person is a procedure that requires specific steps. Here's a general guideline:

  1. Appointment as Administrator: If the deceased didn't leave a will, you'd most likely need to be appointed as the administrator of their estate to handle their affairs, including filing insurance claims.
  2. Obtain the Death Certificate: You will need a copy of the death certificate, which verifies the person's death and your authorization to act on their behalf.
  3. Identify the Insurance Policy: Locate the insurance policy held by the deceased individual. It could be a homeowner's insurance policy or another type of property insurance.
  4. Contact the Insurance Company: Inform the insurance company about the death immediately. Provide them with a copy of the death certificate and other necessary documents.
  5. File the Claim: Follow the insurance company's process for filing a claim, which usually involves completing a claim form and providing any required documentation.
  6. Handle the Payout: Once the claim is approved, the payout may go directly to the estate to cover any debts. 

The Nuances Of Flood Coverage

Most standard homeowner policies do not cover flood damage. A homeowner must usually purchase separate flood insurance to cover flood-related damages if they live in a flood-prone area.

The National Flood Insurance Program (NFIP) offers insurance to any homeowner, regardless of flood risk. 

It's worth considering purchasing flood insurance if you live in a flood plain, near a river, or on the coast.

What Happens If My Homeowner Insurance Lapses?

If your insurance lapses, you're uninsured for that period:

A lapse in coverage can happen due to the following:

Many insurers typically have a grace period, usually up to 30 days, from the date of the lapse due to a missed payment. If your insurance lapses, you'll lose liability coverage. You'd be financially responsible for their medical bills if anyone gets injured on your property.

Will I Be Penalized If I Resume Insurance Later?

If you paid your house off and you decide to discontinue your home insurance, there won't be any legal penalties, but it's risky.

Key Takeaways

Safeguarding Your Wealth In The Face Of Uncertainty: Strategies To Thrive

Silicon Valley Bank, founded in 1983, was once the 16th largest U.S. bank. The bank served venture capital firms and numerous tech executives and had $209 billion in assets as of the end of 2022. Over the course of two days in March 2023, the bank failed, making it the 2nd major bank collapse in history.

The collapse occurred due to various factors, including:

Depositors withdrew their funds simultaneously due to concerns about the bank's solvency.

Watch E61: Macro Events and Investment Thematics with Hicham Hajhamou

A bank's failure may make you skittish about your capital. How could it not? This article will cover how to protect yourself and your wealth. 

What Is The FDIC? 

The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the U.S. government that protects the funds depositors place in banks and savings associations. The FDIC was created in 1933 in response to the thousands of bank failures in the 1920s and early 1930s.

How Does FDIC Insurance Work? 

FDIC insurance automatically applies to all deposit accounts at insured banks. The full faith and credit of the United States government back the insurance up to the insurance limit. The full faith and credit of the United States government back the insurance. Even if a bank fails, the government guarantees depositors will receive their insured balances.

What Protections Does FDIC Offer? 

FDIC insurance covers all deposit accounts, including:

The protection is up to the insurance limit of $250,000 per depositor, per insured bank, for each account ownership category.

FDIC insurance does not cover the portion over that amount

What If An Account Exceeds The FDIC-Insured Amount And The Bank Fails? 

If a depositor's accounts at one FDIC-insured bank or savings association total more than $250,000, FDIC insurance does not cover the portion over that amount. In the event of a bank failure, the depositor may lose funds that exceed the FDIC insurance limit.

How Can I Evaluate The Health Of A Bank?

Evaluating a bank's health involves assessing various financial indicators and understanding the overall banking environment. Here are some steps you can take:

  1. Review Financial Statements: Banks' financial statements are public documents that provide information about their financial health. Look at key metrics like return on assets (ROA), return on equity (ROE), non-performing loan ratios, and capital adequacy ratios.
  2. Check the Bank's Credit Ratings: Credit rating agencies such as Moody's, Standard & Poor's, and Fitch Ratings provide ratings that reflect their assessment of the bank's ability to repay its debts. A high credit rating is usually a good sign.
  3. Look at the Bank's Tier 1 Capital Ratio: This ratio indicates how much of the bank's core capital is available to cover unexpected losses. The higher the percentage, the better the bank prepares to handle economic downturns.
  4. Examine the Efficiency Ratio: This ratio reflects the bank's overhead as a percentage of its revenue. Lower ratios typically indicate an efficient bank.
  5. Check FDIC's Bank Data & Statistics: You can use FDIC's online database to find out if a bank is FDIC-insured and obtain a wealth of other information about its financial health.
  6. Consider the Economic Environment: A bank's health often reflects the state of the economy. In a booming economy, banks generally perform well. In a recession, however, even a well-run bank may struggle.

These are just indicators and should be part of a broader analysis. Each measure has limitations and may not provide a complete picture of a bank's financial health.

How Can Individuals Mitigate This Risk? 

There are several strategies to ensure your deposits stay within the FDIC coverage limits:

Spread Money Across Different Account Ownership Categories

The FDIC provides separate coverage for deposits held in different account ownership categories, such as:

Depositors may qualify for over $250,000 in coverage at one insured bank if they own deposit accounts in different ownership categories.

Open Accounts With Multiple FDIC-Insured Banks

You can increase your coverage by opening accounts at more than one FDIC-insured bank. Each separate bank has its own $250,000 insurance limit.

How Can Real Estate Investors Hedge Against Future Bank Failures?

Real estate investors can hedge against future bank failures by diversifying their investment portfolios. Here are some strategies:

  1. Invest in Real Estate Investment Trusts (REITs): REITs allow individuals to invest in large-scale, income-producing real estate. They provide a way to access real estate markets without buying or managing property directly. REITs are traded on major stock exchanges, offering liquidity, which real estate itself does not. 
  2. Bonds and Treasury Inflation-Protected Securities (TIPS): Bonds, especially U.S. government bonds, are considered safe investments during economic downturns. TIPS mainly protects against inflation, which can often follow bank failures. 
  3. Keep Cash Reserves: Keeping a portion of capital in cash or cash equivalents provides flexibility in an economic downturn and allows investors to take advantage of opportunities during such periods.

All investments carry risk, and it's essential to research and seek advice from a financial advisor before making investment decisions.

Key Takeaways

Banks can fail at any time. As a result, the FDIC insurance covers up to $250,000 per depositor, per insured bank, for each account ownership category, but amounts exceeding the FDIC insurance limit are not insured.

Individuals should spread money across different account ownership categories, open accounts with multiple FDIC-insured banks, or use the CDARS program.

Real estate investors can hedge against future bank failures through diversification, including investing in REITs, stable foreign currencies, bonds and TIPS, non-correlated asset classes, and keeping cash reserves.

Join our community in weekly Royal Investing Group Mentoring. You'll hear from other investors about their journeys while having the opportunity to share your insights and experiences.

Bad Beat and Best Deals in Note Investing

Investing in real estate notes can generate income without direct property management. Instead, investors earn interest on the loan. However, it carries risks, such as borrower default. Before investing in real estate notes, thorough due diligence is crucial for potential investors.

Watch Episode 60: Bad Beat and Best Deals in Note Investing with Paige Panzarello

Discover the fascinating world of note investing! Dive into the captivating presentation above and the informative blog below, where we unravel the intricacies and nuances of this exciting investment strategy. Get ready to unlock new insights and opportunities in note investing!

Discover The Magic Of Notes!

In real estate investing, a note, or promissory note, is a financial instrument that documents a property purchase loan. It's a written promise from the borrower to repay a specific amount to the lender under agreed terms.

Key features of notes in real estate investing:

  1. Principal and Interest: The note specifies the loan amount, including the original principal and the interest rate. The interest can be fixed or variable, based on the agreement.
  2. Repayment Schedule: Outlines the repayment schedule, specifying payment due dates and amounts. Repayment can be monthly, quarterly, or agreed upon by all parties.
  3. Term: The note's term is the duration for loan repayment, ranging from months to years.
  4. Default Provisions: The note also includes provisions for borrower default, which may lead to foreclosure and the lender taking ownership of the property to recover their investment.
  5. Collateral: In real estate investing, the purchased property is collateral for the loan. If the borrower defaults, the lender can seize and sell the property to recover funds.

Unleash Your Inner Financial Power: Becoming The Bank

Becoming the bank with notes investing means buying mortgage notes and taking on the role of the lender. Instead of owning the property, you invest in debt or loans where the borrower owes you money.

Here are the steps to become the bank with notes investing:

  1. Educate Yourself: Before you start note investing, it's crucial to understand the basics. Familiarize yourself with terms like performing vs. non-performing notes, first vs. second liens, and the foreclosure process.
  2. Find Notes to Buy: You can buy real estate notes from banks, hedge funds, brokers, or other investors. Online platforms and marketplaces also exist for finding notes for sale.
  3. Due Diligence: Just like in property investing, thorough research is crucial. Assess the borrower's payment history, property condition, value, and loan terms. Also, verify all legal documentation.
  4. Purchase the Note: After researching and selecting a note to invest in, you can proceed. The transaction process usually involves a purchase agreement and the transfer of notes and mortgage documents.
  5. Manage the Investment: You take on the bank's role after purchasing the note. For performing notes, you'll receive monthly payments from the borrower. For non-performing notes, you may need to work with the borrower to resume payments or go through the foreclosure process.
  6. Exit Strategy: Depending on the outcome, note investors can profit by receiving loan payments, selling the note for a profit, or acquiring and selling the property in case of foreclosure

Explore the World of Investment: Uncover the Diverse Spectrum of Notes

There are several types of real estate notes that you can invest in, each with its level of risk and potential return. Here are a few:

  1. Performing Notes: These loans require regular borrower payments as agreed in the loan terms. Investing in performing notes yields a steady income stream from loan interest.
  2. Non-Performing Notes: These are loans where the borrower has stopped paying. You can buy non-performing notes at a discount. As an investor, you can profit by helping the borrower, restructuring the loan, or foreclosing and selling the property.
  3. Seller-Financed Notes: Owner-financed notes occur when the property seller finances the buyer's purchase. The buyer then pays directly to the seller or the investor who purchases the note.
  4. Junior Lien Notes: These are secondary mortgages on a property. Junior lien notes can offer high returns but come with higher risk as they are subordinate to senior liens. In foreclosure, senior liens get paid first.
  5. Reperforming Notes: Previously non-performing loans are current, making them attractive to investors. They are often sold at a lower price than performing notes yet carry less risk than non-performing ones.
  6. First Lien Notes: Primary mortgages are paid first in the event of property foreclosure, prioritizing the first lien holder over other lien holders.
  7. Commercial Real Estate Notes: These are for commercial properties such as offices, retail spaces, or apartment complexes. Commercial real estate notes can yield higher returns than residential notes but require expertise for effective management.

Key Takeaways

Investing in notes is an excellent strategy to diversify your portfolio. It generates income without property ownership challenges, like maintenance, tenants, or property taxes.

As a note investor, you earn returns from loan interest, generating passive income. Note investing offers a range of risks and rewards, from the safety of performing notes to the high-return potential of non-performing or junior lien notes. Tailor your investment approach to match your risk tolerance and financial goals. Note investing can also mitigate portfolio risk as it is less correlated with the stock market, providing a buffer during market volatility.

Note investing provides ample opportunities for diversification within the asset class. Investors have many investment options like residential and commercial notes, first and junior liens, and reperforming notes.

Are you interested in note investing? Want to make informed investment decisions? Join us in Royal Investing Group Mentoring. Learn from the best, network with investors, and fuel your journey to financial empowerment. 

Don't miss out! Click here to register for our upcoming session.

Deal Structuring Secrets

Unlocking deal structuring secrets can make or break an investment, and these powerful insights often hide within the pages of a Private Placement Memorandum (PPM). 

Watch Episode 59: Deal Structuring Secrets with Seth Bradley, Esq.

Get ready to dive into the captivating world of deal structuring secrets within a PPM! Discover how these hidden gems can unlock tremendous benefits for you as a savvy real estate investor. 

Deal Structuring Secrets In A Private Placement Memorandum

A Private Placement Memorandum (PPM) is a document that provides detailed information about a company's business, finances, and investment offering. Its primary purpose is to inform potential investors for private offerings, especially in real estate, about associated risks that vary depending on project specifics.

Summary Of The Offering

The Executive Summary of a Private Placement Memorandum (PPM) is a concise overview of the investment offering and the company:

  1. Company Overview
  2. Offering Overview
  3. Business Model and Strategy
  4. Market Opportunity
  5. Key Personnel

Offering

The Offering section details the specifics of the investment opportunity in detail:

  1. Securities Offered
  2. Offering Amount
  3. Price Per Security
  4. Minimum Investment
  5. Use of Proceeds
  6. Risk Factors
  7. Exit Strategy
  8. Subscription Procedures

Rule 506(b) vs. Rule 506(c) 

While similar, these rules differ in who they allow to invest and how advertising occurs.

Rule 506(b)

Rule 506(b) allows a company to raise unlimited capital from accredited investors and up to 35 non-accredited investors. 

Rule 506(c)

Rule 506(c) was introduced through the JOBS Act of 2012 to make it easier for companies to raise capital. Under this rule, a company can advertise its offering and solicit investments publicly, a significant departure from the limitations of 506(b).

The choice between Rule 506(b) and Rule 506(c) depends on the company's fundraising strategy:

Use of Funds

The Use of Funds section outlines how the company will allocate the capital raised from the offering across different areas.

  1. Debt Repayment
  2. Operational Expenses
  3. Capital Expenditures
  4. Acquisitions
  5. Reserves

Misuse of funds can lead to legal repercussions and damage the company's reputation. 

Company 

The Company section gives potential investors comprehensive information about the company's history, operations, and products or services. Here are some key elements that are typically included in the Company section:

  1. History and Background
  2. Business Model
  3. Market Overview
  4. Management Team
  5. Corporate Structure
  6. Financial Information
  7. Legal Proceedings

Management

The Management section is crucial for potential investors to evaluate the qualifications, experience, and track record of the company's leaders and their investment:

  1. Biographies
  2. Track Record
  3. Ownership
  4. Compensation
  5. Board of Directors or Advisors

A competent, experienced management team can often be a significant factor in an investor's decision to invest in a company. 

Business Plan

The business plan section overviews the company's strategy to achieve its objectives. Key elements typically included in a PPM's business plan section are:

  1. Company Overview
  2. Products or Services
  3. Market Analysis
  4. Marketing and Sales Strategy
  5. Operations
  6. Financial Projections
  7. Risk Factors
  8. Exit Strategy

Fees

These fees are usually subtracted from the capital raised, greatly affecting the net proceeds and overall return on investment (ROI). Here are some common types of expenses in a PPM:

  1. Management Fees
  2. Performance Fees or Carried Interest
  3. Placement Agent Fees or Underwriting Fees
  4. Legal and Accounting Fees
  5. Organizational and Offering Costs
  6. Broker-Dealer Fees
  7. Exit Fees

Distributions

The Distributions section outlines how and when investment profits or returns go back to investors. It usually covers aspects like:

  1. Distribution Policy
  2. Distribution Method
  3. Distribution Priority
  4. Reinvestment Options
  5. Tax Implications

Risk Factors

The Risk Factors section assists investors in making informed decisions based on their risk tolerance, investment objectives, and personal circumstances. It discloses common types of risks in a PPM.

  1. Business Risks
  2. Financial Risks
  3. Market Risks
  4. Investment Risks
  5. Legal Risks

Investor Suitability and Qualifications

Accredited investors meet specific financial criteria set by the SEC, like having a net worth over $1 million (excluding their primary residence) or an annual income above $200,000 for the past two years (or $300,000 combined income if married).

Non-accredited investors in a 506(b) offering must be 'sophisticated' - possessing enough financial and business knowledge to evaluate the investment.

Instructions To Invest And Subscription Agreement

Instructions to Invest 

This section provides potential investors with step-by-step instructions on how to invest: 

Subscription Agreement

A contract between a company and an investor that outlines the terms of the stock sale:

Operating Agreement

The operating agreement establishes rules and procedures for managing the company or investment fund. It's a contract between partners or members outlining their rights, responsibilities, and financial interests. Includes:

  1. Company Structure
  2. Roles and Responsibilities
  3. Capital Contributions
  4. Profit and Loss Allocation
  5. Voting Rights and Decision-Making Procedures
  6. Transfer of Ownership
  7. Dissolution Procedures

Key Takeaways

Mastering key aspects like management and performance fees, distribution policies, and exit strategies is crucial for a successful PPM. These elements significantly impact net proceeds and ROI, necessitating careful assessment and negotiation to protect investor interests. Diligent due diligence and skillful deal structuring are essential for successful private placements.

Master due diligence & deal structuring with our Royal Investing Group Mentoring Session. Learn from experienced investors, gain insights into their strategies, & get real-time answers to your questions. Maximize your investment potential. Sign up for our free group mentoring & become a more savvy investor.

Bad Beat Lessons in Due Diligence

Have you ever experienced a bad beat in real estate investing? These failed investments provide invaluable lessons in due diligence. 

Seasoned real estate investor Scott Sutherland joined us to talk about a time he had a deal go bad, the wisdom he gleaned from the experience, and insight into how to avoid his experience. 

Watch E57: Bad Beat Lesson in Due Diligence with Scott Sutherland

Lessons In Due Diligence With Partners And Sponsors

Due diligence describes the comprehensive analysis and evaluation of a potential business partner, sponsor, or investment opportunity. In real estate, this process is paramount for investors as it helps them understand the risks of a prospective partnership or sponsorship. 

It involves scrutinizing factors such as:

Entering into a partnership without conducting due diligence leads to disastrous consequences:

Additionally, if the sponsor has a tarnished reputation or poor financial health, it could negatively affect the investor's credibility and future business prospects.

Property Classification Lesson In Due Diligence

Property classification is an integral part of real estate due diligence. It helps investors understand the potential risks and rewards associated with different properties. Here's a guide to help you navigate this process:

Understanding Property Classifications

Class A Properties: These are top-tier properties in prime locations, often newer builds with high-quality construction. They attract high-income tenants and offer modern amenities but come with higher purchase prices.

Class B Properties: These properties are typically older but well-maintained. They might not be in prime locations but in stable neighborhoods and attract middle-income tenants. They usually have lower rents than Class A properties but offer the potential for value-add opportunities.

Class C Properties: These are older properties, usually 20+ years old, located in less desirable neighborhoods. They attract lower-income tenants and may require significant maintenance or upgrades. However, they offer higher cap rates and cash flow potential.

Class D Properties: These are often found in challenging neighborhoods, requiring extensive repairs. They have the lowest purchase price and risk, attracting low-income tenants and often experiencing high vacancy rates.

Key Consideration Factors

When selecting a property class to invest in, consider the following:

Researching Property Classification

To determine a property's classification, you should:

Embracing the Silver Lining: Lessons From A Bad Real Estate Deal

A bad deal provides invaluable lessons, helping us grow and evolve as investors. Each setback offers a unique opportunity to learn, adapt, and improve. When a deal goes south, we must analyze what went wrong:

By identifying these errors, we avoid them in future deals.

Bouncing Back After a Bad Investment

As a real estate investing coach, many investors experience setbacks. However, the most successful ones see these setbacks not as roadblocks but as stepping stones to greater success.

Stick to Your Investment Plan

When faced with a bad deal, it's crucial to remember why you started investing in the first place. Revisit your investment plan and remind yourself of your goals. It will help you stay focused and avoid reactive decisions based on temporary circumstances.

Avoid Emotional Responses

Feeling disappointed or frustrated after a bad deal is natural, but acting on these emotions leads to rash decisions. Take a step back, give yourself time to process the situation, and approach the problem with a clear, calm mind.

Develop a Strategic Recovery Plan

Identify what went wrong and plan to recover from the loss: selling the property, refinancing, or increasing its value. Consult with a real estate professional or mentor to gain insights and advice.

Learn from Your Mistakes

Every setback is a learning opportunity. Analyze the deal to understand what led to the loss:

Once you've identified the mistakes, use these insights to avoid similar pitfalls in the future. 

Prevention is Key

To prevent future bad deals, enhance your due diligence process. Research market trends, thoroughly inspect the property, and always factor in unexpected costs when calculating potential profits.

Key Takeaways

Due diligence is fundamental in real estate investing as it aids in understanding better the potential risks and rewards of a property before making a final commitment. It involves meticulously evaluating market trends, property conditions, and financial projections. 

This process allows investors to uncover any potential problems, such as unexpected renovation costs or unfavorable market conditions, that could affect the profitability of the investment. Through effective due diligence, investors make informed decisions, prevent bad deals, and enhance the likelihood of a successful investment.

If you want more personalized advice on navigating your real estate investment journey, consider joining us for Royal Investing group mentoring. Our community members are ready to share their wealth of knowledge and insights to help you avoid common pitfalls and maximize your investment potential. Click here to sign up today!

Syndication to Grow Wealth

Are you looking for an investment opportunity that offers passive income, potential for asset appreciation, tax advantages, and diversification? If you said yes, you should learn how to grow wealth with syndication.

Syndication is a method where multiple investors come together to fund a project or venture that would be too expensive or risky for an individual investor. The group of investors is the syndicate.

The investments could range from real estate projects to corporate bonds, startups, TV shows, and real estate. Each syndicate member contributes a portion of the required capital, reducing the financial burden on any single investor.

Watch Syndication to Grow Wealth with Hicham Hajhamou as an additional resource. 

Grow Wealth With Syndication

You grow wealth with syndication in a variety of ways. From having control of your money to diversification, keep reading for more information about the characteristics and advantages that syndication offers you.

Control

Syndication differs from other investment vehicles like mutual funds or stocks: In a syndicate, 

investors have:

Passive Cash Flow

Once the project generates revenue, you will receive a share of the profits proportional to your initial investment. You earn income without managing or operating the investment yourself actively.

Asset Appreciation

Syndication leads to asset appreciation. Over time, the value of the project or venture may increase, leading to a higher return when the asset is sold or refinanced. For instance, if the syndicate invests in a real estate project, property improvements or market changes could increase the property value over time.

Tax Advantages

Syndication also offers tax advantages. In many cases, the costs associated with the investment, such as interest on loans or depreciation on real estate, are deductible from the income generated by the syndicate. You reduce your overall tax liability.

Diversification

Investing in a syndicate diversifies your portfolio. You reduce risk and increase potential returns by spreading your investments across different projects and asset classes.

Have more questions about how to grow wealth with syndication? Check out our blog posts for more detailed and granular information:

Syndication: Due Diligence And Mentors

Embarking on the syndication investment path is an exciting venture that yields significant financial rewards. However, it is crucial to approach this journey with due diligence and the guidance of a mentor for optimal success.

Due Diligence

Due diligence is the comprehensive appraisal of a business or person before signing a contract or entering an agreement. For instance, if you are considering investing in a real estate syndication, your due diligence might involve evaluating the property and its:

You also will want to understand the syndicate manager's experience and strategy for managing and eventually exiting the investment.

Mentors

Having a mentor is equally important. A mentor with experience in syndication investments provides invaluable advice, shares their experiences, and guides you through complex situations. 

They help you:

Find a suitable mentor through networking events, industry associations, or even social media groups related to syndication investments. 

Unique Assets To Grow Wealth With Syndication

Investing in syndication offers access to various alternative asset classes, each with unique characteristics, risks, and rewards.

Self-Storage Facilities

These are becoming increasingly popular as an investment due to their lower operational costs and resilience during economic downturns. However, the success of a self-storage facility heavily depends on its location and local demand. Due diligence should include analyzing the local market, competition, occupancy rates, and potential for rent increases.

Mobile Home Parks

These offer steady cash flow and lower maintenance costs, as tenants often own the homes and rent the land. However, specific laws and regulations make managing these parks complex. When conducting due diligence, consider location, occupancy rates, turnover, and local laws.

Multifamily Properties

These are residential buildings with multiple housing units, such as apartments or condominiums. They offer stable income due to the high demand for housing but require effective management and maintenance. The key factors are location, property condition, vacancy rates, and rental income potential.

Office Buildings

These properties are lucrative, especially in high-demand areas. However, they’re risky, particularly during economic uncertainty when businesses may downsize or close. Due diligence should involve assessing the local commercial real estate market, current tenant leases, and potential for rent increases.

Land

Investing in raw land involves purchasing a plot to sell at a profit or develop later. While it has a high potential for returns, it carries significant risks, including zoning issues and market fluctuations. Due diligence should involve a thorough analysis of local zoning laws, market demand, and development potential.

Key Takeaways

Syndication investments present a unique opportunity to enter the realm of real estate and other alternative asset classes, offering the potential for significant returns:

Join us for FREE Royal Investing Group Mentoring to change the trajectory of your investment journey. Take advantage of this opportunity to gain valuable insights from experts and transform your financial future.

Unlocking The Secrets Of Self-Directed Tax-Sheltered Profits

Are you looking to take control of your financial future? Self-directed IRAS are a popular option for investors who want to diversify their portfolios. Amanda Holbrook with Specialized Trust Company joined us and explained how to maximize sef-directed tax-sheltered profits. 

The current financial climate is unpredictable, making it more critical than ever to make smart investments that will protect your wealth and help you reach your retirement goals. A self-directed IRA offers the potential for higher returns on investment (ROI) than traditional IRAs while also providing diversification opportunities that can help reduce risk.

Read on to learn more about the advantages of investing in a self-directed IRA.

Characteristics Of A Self Directed IRA

Unlike traditional IRAs and Roth IRAs, which limit investments to stocks, bonds, mutual funds, and other securities approved by the IRS, SDIRAs allow investors to invest in alternative assets.

Types of Investments Available

SDIRAs offer investors many investment opportunities beyond those available with traditional IRAs or Roth IRAs. These include:

Tax Benefits of Self-Directed IRAs

A self-directed IRA gives you more flexibility and control over where you invest your money. 

In addition to increased flexibility and control over investments, self-directed IRAs offer more significant potential for higher returns than other retirement accounts due to their ability to invest in real estate or private businesses.

Investors can use funds from their self-directed IRA to purchase properties or start businesses without paying taxes if they follow IRS rules and regulations regarding prohibited transactions.

If you're interested in taking advantage of the potential benefits offered by a self-directed IRA, there are several steps you should take:

  1. Choose an administrator who specializes in self-directed IRAs;
  2. Open an account with your chosen administrator;
  3. Fund your account with cash or rollover funds from another retirement plan;
  4. Select investments that meet IRS guidelines; and
  5. Monitor your investments regularly and comply with all applicable laws and regulations related to investing with a self-directed IRA.

The bottom line on SDIRA tax benefits:

Investing in Real Estate with Tax-Sheltered Capital

Investing in real estate with a self-directed IRA is attractive for diversifying your retirement portfolio. It allows you to invest in real estate without paying taxes on the profits until you withdraw them from your account. But certain restrictions and requirements apply when investing in real estate with a self-directed IRA.

Basic Requirements and Restrictions

To invest in real estate with a self-directed IRA, you must have an existing traditional or Roth IRA account. You must also set up a qualified custodian to oversee the transactions and ensure you follow IRS rules. The custodian will also handle the paperwork associated with the investment, such as filing tax forms and other documents.

The IRS dictates the types of investments that are allowed. Generally, you must invest in "real property," including the following: 

Transitioning to a Self-Directed IRA

There are several accounts that you may transition to an SDIRA. The following are among the most common.

Traditional and Roth IRA

Both Traditional and Roth IRAs can be transitioned into self-directed IRAs. The process is relatively simple:

Employer-Sponsored Accounts

401(k)s and other employer-sponsored accounts can also roll into a self-directed IRA. The process is similar to transitioning from a traditional or Roth IRA. 

Brokerage Accounts

While brokerage accounts offer a wide array of stocks, bonds, and mutual funds, they typically do not provide the alternative investment options of a self-directed IRA. Converting a brokerage account involves:

Key Takeaways

The key points to understand when investing through a self-directed IRA are the range of investment options, the IRS restrictions, and the responsibility and risk that come with a self-directed IRA. 

If you're looking to take advantage of the unique benefits offered by a self-directed IRA, Royal Investing can help you on your journey. Sign up for group mentoring to learn how to maximize your investment opportunities and capitalize on the potential benefits of a self-directed IRA.

How Real Estate Investors Utilize Whole Life Insurance

Whole Life Insurance policies are permanent solutions that offer a wide range of benefits and perks. They are financial tools that help solve needs like:

The cash value account is an investment vehicle within the policy where a portion of premiums are invested and accrues interest over time. The policyholder can access this money while still alive by taking out loans against the policy or cashing out the policy entirely if needed. Before doing anything with the cash value in your life insurance policy, consult your trusted life insurance professional and CPA to learn the consequences of cashing out your policy.

What Is A Whole Life Insurance Policy?

Whole Life Insurance is a type of permanent life insurance that is considered the safest place to put your money due to the guarantees set out in the contracts. These policies have a leveraged death benefit that accrues a cash value that you can utilize for outside investments while your money is still participating in the growth inside of the life insurance policy.   

Advantages Of Whole Life Insurance Policies

The main advantage of Whole Life insurance in your financial planning is SAFETY. Life insurance is a contract that comes with guarantees. The insurance company guarantees certain returns, benefits, and protections as long as the premiums are paid. Those benefits are on a case-by-case basis, and life insurance is about solving each client's specific issues, problems, or desires.  

First, determine the death benefit amount. How much insurance are we buying in year one or over the course of the client's lifetime? This value is the determining factor for how much money is put into the policy. The death benefit also dictates the majority of the cost basis for the plan and controls how much money is distributed when the client dies.

Second, life insurance can be an investment vehicle and financial planning aide.   

There are disadvantages to consider with whole life insurance policies, such as urrender fees and tax implications for early cash-out.

How To Use The Cash Value In Your Policy

You have a few options to use the cash vaule in your policy. Each option has pros and cons outlined below.

Working with a knowledgeable, trusted, licensed, and educated insurance agent is the best way to get the outcome you desire.

Tax Implications Of Whole Life Insurance Policies

Whole life insurance policies have several tax implications to be aware of: 

Real Estate Investors And Whole Life Insurance Policies

One huge advantage of using the cash value component of a whole life insurance policy for real estate investors is that it can act as a source of financing:

This loan can be an attractive option for investors who need help securing financing through traditional channels, such as banks or mortgage lenders. Also, the policy loan is not considered income, so it does not incur taxes.  

Policy loans are collateralized against life insurance. They do not count towards your DTI, so they don’t affect your ability to qualify for loans. In fact, life insurance can help you qualify for more loans as life insurance is in your asset column and makes you more able to pay for your debts.  

Additional Considerations

Comparing the advantages and disadvantages of using the cash value component of a whole life insurance policy versus other investment vehicles is crucial for real estate investors: 

These investment vehicles do not offer the guaranteed death benefit that whole life insurance policies provide.

Key Takeaways

A whole life insurance policy may be worth considering if you want to save your money safely, let it grow, utilize it while it grows, and pass it on in ways you would not otherwise be able to. Whole Life insurance provides a safe, guaranteed place for your money to be utilized, grow, and pass on.  

Understanding Split-Dollar Life Insurance: What You Need to Know

In a rapidly changing financial landscape, split-dollar life insurance plans have become a tool for business owners, high-net-worth individuals, and sometimes employees. 

First, every split-dollar plan involves an agreement between two parties–typically an employer and an employee or business owner and themselves–sharing the cost, benefits, and ownership of the policy. 

The company pays the premiums, but the insured is the policy beneficiary and can borrow against its cash value while still alive. Other benefits of split-dollar plans are the ability to maintain flexibility, and are customizable to suit the individual needs of different parties. If you are looking for ways to lower your tax bill while also creating financial protection for yourself and your family, a Split-Dollar plan should be something that would be valuable to your financial toolkit.

What Is A Split-Dollar Life Insurance Plan?

Split-dollar life insurance is a contract where two parties agree to split the expenses and advantages of a permanent life insurance policy. Real estate investors can utilize split-dollar plans to offset their tax liability while maintaining access to their money, which provides notable benefits in lowering costs while at the same time increasing your financial stability, creating extra income that you can utilize during retirement tax-free and pass on to your children.  

Working with a qualified CPA, Attorney, and Life Insurance agent, the money that would have been considered as regular income is “split” between personal and corporate income. This is the starting point for tax savings. We then use a Cash Value life insurance policy tailored for cash savings and growth, not death benefit, to hold the money as income for the corporation. The owner and beneficiary of the said policy can use the Cash value as they see fit. This setup is somewhat simple. However, it is highly regulated and commonly audited which is why the policy formation must be prepared and administered by qualified professionals.

Example Of A Split-Dollar Life Insurance Plan

Imagine John, a successful entrepreneur who has a pretax income of $200,000 that he pays to himself from his company. John is tired of losing so much of his income to taxes and sees value in leaving a legacy of financial security to his family. So John decides to work with a group of professionals to create what tax savings he can.

With the plan in place, John will continue to take $86,000 as regular income lowering his personal income from 32% to 22%. The remainder of his $200,000 income will be dispensed into a C-Corp specifically set up for this purpose. His C-Corp will realize the $114,000 as income and pay corporate income taxes on that money. Instead of paying 24% and 32% in income tax had John taken that money as personal income, the C-Corp pays 21% and lowers John's tax debt. At this point, John can’t touch the money, and if he does, he has to pay personal income tax on it.  

Once the taxes have been paid, the C-Corp will purchase a Cash Value Life Insurance Policy on John, and one of the benefits of this Cash Value policy is that John can access the money inside of the policy “tax-free.” This Life insurance policy is not your regular, “I want life insurance” policy. It is a highly customizable, adjustable, and unique policy that is built specifically for the purpose of these plans.

So the net benefit is that John pays less in taxes, maintains access to the money, and builds a financial nest egg in the form of a life insurance policy that not only offers a way to pass on what John has worked so hard to build, but also acts as leverage for John to grow and expand financially, at a rate that he wouldn’t have otherwise.   

Advantages Of A Split-Dollar Life Insurance Policy

Split-Dollar Life Insurance plans contain a lot of advantages for those who are capable of utilizing the structure. The parties involved in a split-dollar arrangement come to an agreement to share in the costs of the plan and thus share in the benefits. If you are the sole proprietor of your business, then you are splitting the benefits with yourself. If your business operates as a partnership, each partner can set up their own split-dollar plan.  

Split-dollar life insurance policies benefit those who want to:

Disadvantages Of Split-Dollar Life Insurance

There are some drawbacks to split-dollar life insurance, including the following:

When evaluating whether split-dollar life insurance is right for you, consider and understand the following:

Key Takeaways

A split-dollar plan is an arrangement between two parties to share the costs and benefits of a permanent life insurance policy. The benefits of a split-dollar life insurance policy include:

In conclusion, a split-dollar insurance plan can be an excellent fit for a real estate investor. Schedule a meeting to review all the key points, including the benefits and drawbacks of the plan.

This article has been written for educational purposes only and is not financial advice nor a recommendation for anyone to utilize the strategies discussed herein. Work with certified Tax and Financial advisors to determine the right solutions for you and your financial situation.   

Secure Your Family's Future with Term Life Insurance

Term Life Insurance is designed to protect you and your family for a specific period of time. These specific terms are usually anywhere from 10-30 years. Term Insurance is a straightforward option for providing lots of coverage at a very affordable cost.

It might be the perfect option if you're looking for a reasonably priced way to protect your family. It provides temporary coverage at a fixed price, making it affordable and flexible. Considering both the advantages and disadvantages before investing in a policy is essential.

What Is Term Life Insurance?

Term Life insurance is a legal and binding contract between the policyholder and an insurance company. These policies usually have a length of time clause ranging somewhere from 10-30 years. Should the policyholder pass away during this specified period the insurance company will pay the specified sum of money to the beneficiaries of the policy holder. A good life insurance policy will also include LIVING BENEFITS, these offer coverage for things such as chronic, critical, and terminal illnesses such as heart attacks, strokes, or cancer. They can also be used for long term care. 

During the specified term the policy holder typically pays a level premium into the policy and if anything happens to the policy owner the policy will pay out what is called the death benefit.  Triggering events for a payout can also include such things as critical illness, disability, and long term care. Which means that you could get money while you are still alive to help pay for what could be catastrophic medical and long term care expenses.

Policy Characteristics

Why Is It Attractive?

Many people find term life appealing because it offers significant coverage at a reasonable price. Unlike permanent life insurance policies, term life policies have no cash value and are less expensive in terms of paying for death benefit  than whole life insurance.  Added on top of that all proceeds from life insurance are tax free.  Which means that your loved ones get everything that you wanted to leave them.

Term Life Insurance offers flexible coverage from annual renewable terms all the way up to 30 years. It is designed for and meant to help individuals and families cover the costs of living should you lose your ability to provide for your family due to death or critical illnesses. The money can be used to pay off mortgages, fund children's college tuition, or help reestablish your life after the crushing loss of a loved one.

Current market trends also drive more people to purchase term life policies. 

How Does It Work?

Decide how much insurance you need by following one the 4 calculation methods, DIME, 10x annual salary, 4% rule, or $50,000/child/year until 18, college tuition costs, and payoff mortgage.

After getting approved and having a policy in place, should anything happen to the policy holder the specified beneficiaries will submit a claim to the insurance carrier and will be paid out the death benefit.

If the policy owner has a triggering event while they are alive that is covered through the critical, chronic, terminal, disability, or long term care sections of the policy the insurance carrier will pay out the specified portion of the death benefit to the policy holder.

Benefits of Term Life Insurance

Potential Drawbacks

The Pros And Cons

Pros

Cons

Factors To Consider When Purchasing

Consider several factors, including age, dependents, and financial goals:

Key Takeaways

Regarding financial security, buying a term life insurance policy is an option for the budget-minded investors who aren’t ready for the financial leverage that permanent life insurance policies can offer. It's essential to remember that it is temporary and won't accumulate any cash value over time.

It's crucial to consider variables like:

Don't wait any longer - schedule a meeting with our team today. With our expert advice, you can make informed decisions about your investments and ensure that you protect your assets from potential risks or disasters.

Syndication: PPM Creation Tool

So you're ready to invest in real estate syndications. This type of investing is complex, with many different factors at play that are outlined through PPM documentation. Tools that make the process easier are invaluable, as with any complicated investment.

Stephen Slawinski shows the power of a PPM creation tool in Episode #64 of Royal Investing Group Mentoring. Watch the detailed walkthrough here!

In this blog, we curated the critical information that you should have available as you start your investing adventure.

Private Placement Memorandum (PPM) Deal Structures

Several different types of PPM deal structures exist.

Identified Deal

An identified deal is a PPM deal structure where the investor knows what and where they are investing:

Non-Specified Fund

A non-specified fund is a PPM deal structure where the investor does not know what they are investing in but instead invests in a pool of assets managed by an investment firm:

Semi-Specified Fund

A semi-specified fund is similar to a non-specified fund but with more transparency:

Feeder Fund

A feeder fund is a PPM deal structure where one or more funds "feed" into another larger fund that then invests those funds into various assets on behalf of the investors:

Opportunity Zone

An opportunity zone is a PPM deal structure that allows investors to defer paying taxes on capital gains until 2026 if they invest those gains into certain designated areas as defined by the US Treasury Department's Opportunity Zones program.

Issuer's Information (PPM)

The section of the issuer's information provides prospective investors with detailed information about the offering, including the terms and conditions of the security offered, any risks associated with investing in it, and other vital details.

When you provide information about this section, you'll also need to consider the following:

What's The Management Entity In A PPM?

A management entity is any individual or group assigned to manage a project. In real estate syndications, this could include:

The management entity is responsible for the following:

Sponsor's Information

A real estate sponsor has experience structuring and raising funds for a deal. The sponsor also plays a significant role in decision-making throughout the life of the syndication.

Typical Fees Outlined In a PPM

In this section, you'll determine the type, amount, and timeline of fees. Fees may be a way for you to generate income from your investment in syndication. 

Standard fees include the following:

PPM Offering Information

In this section, you'll determine whether you'll have a 506(b) or 506(c):

Accredited Investors

An accredited investor is an entity allowed to trade securities unregistered with financial authorities:

Accredited investors include banks, financial institutions, and other large corporations with access to complex, high-risk investments.

What is a True Up Provision?

A True Up Provision is an accounting adjustment that reconciles two or more balances, often with the help of an adjustment. It also involves adjusting purchase prices based on changes in value since the closing date of a transaction.

It is usually made at the end of a fiscal year or after a transaction has closed. Accountants will review all relevant financial information and make necessary adjustments to ensure accurate records.

Key Takeaways

When investing in a real estate syndication, there are many considerations. It's mountains of information and documentation, and Slawinski's syndication PPM Creation Tool guides you through the process.

If you have questions about syndication real estate investing or general questions about real estate investing, join us in Royal Investing Group Mentoring. It's free and contains valuable information to help you navigate your real estate investing journey.

Syndication: Deal Structuring Secrets

A private placement memorandum is a legal document companies use to raise funds from private investors or venture capitalists. For real estate syndication, the deal structuring document outlines the terms of the investment opportunity.

Watch Seth Bradley, Esq. discuss PPMs in great detail on Episode #59 of our Royal Investing-Strategic Growth Membership. 

Summary Of The Offering In Syndication

The Summary of the Offering refers to a crucial section of a PPM. It's used in real estate syndication to give potential investors an overview of the investment opportunity.

The purpose of the Summary of the Offering is to provide:

The Summary comes immediately after the cover page and the table of contents. It grabs the reader's attention and provides a concise overview of the investment opportunity.

Offering In A Real Estate Syndication PPM

An offering in this context refers to the opportunity for investors to purchase shares in a real estate syndicate and:

506(c) vs. 506(b)

506(b) is a popular exemption for real estate syndicators because it allows for up to:

However, some limitations exist on how those non-accredited investors may learn of the investment opportunity.

One significant aspect of 506(b) is that it prohibits general solicitation and advertising, which means you can only market the investment to people you have an existing relationship.

506(c) is another regulation used by real estate syndicators that allows them to solicit investment offerings to anyone without limits on how many accredited investors they can accept.

Unlike 506(b), syndicators using 506(c) advertise publicly and attract investors through various marketing channels.

Importance of "Use of Funds" In A Syndication PPM

The "use of funds" section is crucial in a real estate syndication PPM, as it outlines how the syndicate uses investors' money.

The "use of funds" section typically includes expenses such as:

Real Estate Syndication Private Placement Memorandum: Company Section

The "Company" section is a critical component that outlines important information about the company offering the investment opportunity.

The Company section typically includes the following information:

Key Elements Typically Included In The Management Section Of A PPM

The management section of a PPM document typically includes the following key elements:

The management section is essential as it provides insight into how the syndicate: 

Private Placement Memorandum: Business Plan Section

The business plan section of a PPM outlines the syndication's investment objectives, strategies, and plans to achieve the set goals.

Below are the essential components of the business plan section:

Deal Structuring: Fees Section Overview

A PPM typically includes a fees section, which details all the fees associated with acquiring, managing, and eventually disposing of the property.

Acquisition Fees

This fee covers the expenses incurred during the purchase of the property. These expenses include legal work, due diligence, and other transaction costs.

Management Fees

This compensation goes to the syndicator or a property management company that oversees the property's day-to-day operations, including leasing units, maintenance, and repair work.

Disposition Fees

This fee covers the expenses incurred during the sale of the property.

Asset Management Fees

Asset management fees go to the syndicator for overseeing the investment and managing the property's overall performance.

Other Fees

Other fees may include legal expenses, accounting fees, and additional regulatory costs associated with the syndication process.

Distributions In A Real Estate Syndicate PPM

Different types of distributions can be included in a PPM, including:

  1. Preferred return refers to the fixed rate of return paid to investors before the general partners.
  2. Equity splits refer to how profits divide between the general and limited partners.
  3. Waterfall provisions specify the order in which profits distribute to different classes of investors.
  4. Capital accounts track investors' contributions to the investment.

It is essential to understand the different types of distributions included in a real estate syndicate PPM, as they can significantly impact the overall return of the investment.

Deal Structuring: Risk Factors

This section aims to disclose any material risks to potential investors so they can make informed investment decisions.

The section should divide into three categories:

Industry risks pertain to risks that affect the real estate industry.

Company risks relate to risks specific to the company offering the securities, such as management and financial risks.

Risks related to securities are inherent in investing in the securities themselves, such as lack of market liquidity or regulatory changes.

Importance And Relevant Contents Of Investor Suitability And Qualification

This section helps protect the interests of both the issuer and investor by ensuring that only suitable investors who can bear the investment risks should participate.

To determine investor suitability, the PPM includes critical concepts such as:

Deal Structuring: Significance Of The Subscription Agreement

The subscription agreement section of the PPM outlines the specific investment opportunity offered to the subscriber. This section typically includes information on the following:

The subscription agreement also outlines the rights and responsibilities of each party involved and may include the following:

Importance Of The Operating Agreement: Syndication Private Placement Memorandum

The operating agreement is a crucial component of the PPM as it sets out the rules and regulations governing the operation of the syndication.

Other Significant Provisions

In addition to the above, the operating agreement should also address other significant provisions, such as the following:

Deal Structuring: Key Takeaways

A private placement memorandum (PPM) is a legal document companies use to raise funds from private investors or venture capitalists. It is an offering memorandum that outlines the following:

Knowing how to navigate a PPM ensures you syndicate deals benefit you. Do you want to learn more about real estate syndication investing? Sign up for our weekly FREE Group Mentoring.

Syndication: SEC Compliance

Syndication SEC compliance involves various rules and regulations investors must follow. Real estate syndication put simply is a group of investors pooling their money together. They use the capital to purchase and manage real estate that is usually beyond their ability to acquire independently. 

The investors form a legal entity like an LLC to buy and manage the real estate. Investors receive profit in proportion to their investment from the following: 

Watch the Royal Investing video featuring securities attorney Stephen Slawinski who specializes in helping real estate sponsors raise capital and stay compliant with the SEC. 

What Is SEC Compliance?

The U.S. Securities and Exchange Commission (SEC) sets regulations and laws that investors must follow. The laws protect investors from fraud and ensure that publicly traded companies provide accurate financial information. Companies file reports with the SEC to demonstrate their compliance. 

Rules And Regulations For Syndicates Under The SEC

The SEC requires syndications to comply with laws concerning securities selling. Syndications remain compliant by following the regulations controlling private placements found in SEC Regulation D. 

Rules And Regulations

Strict rules control a syndication's organization and property transfer. Additional SEC rules for real estate syndicates include the following: 

Syndication: Securities And Non-Securities 

Securities represent financial value and can be traded on a public exchange: stocks, bonds, and options. Non-securities are investments not typically sold on a public exchange, like art and some real estate.

The syndicate's structure determines if your investment is a security or a non-security:

The significant difference is that securities must follow SEC regulations, while the same rules do not bind non-securities.

SEC Compliance: Registration, Exemptions, And Deal Structures

Four acts affect syndications. We'll discuss each and how to avoid the implications of each act. 

Securities Act Of 1933

Under this law, it's unlawful to sell or offer to sell a security without registering the security with the SEC unless the security is exempt from registration. 

Avoid the implication by:

Exemptions under Regulation D, Rule 506(b):

Exemptions under Regulation D, Rule 506(c):

Securities And Exchange Act Of 1934

This law makes it illegal to "effectuate" the sale of a security or accept compensation for the sale of a security as an unregistered broker-dealer. 

The implication is difficult to avoid because selling interests to your company or passive investors is probably "effectuating" the sale of a security. 

Exemptions to this rule appear in Rule 3a4-1.

The Investment Company Act Of 1940

This law stipulates that a company "engaged … in the business of … trading securities" must register with the SEC. 

Avoid the implication:

The Investment Advisor Act of 1940

The law dictates that acting as an investment adviser is unlawful without registering with the SEC. 

Avoid the implication with a direct ownership interest in real estate.

Exemptions:

SEC Compliance: Syndication Structure

JV Structure

Property owned by

 The structure might not be a security if each partner has an active role. If it isn't a security, no other security laws apply. 

Basic Deal Structure

Property owned by 

A basic deal structure helps with the acts in the following ways:

Watch the video to learn more about the Fund of Funds structure.

SEC Compliance Key Takeaways

Deal structure impacts SEC legal compliance requirements. The SEC has a specific definition for what constitutes security and non-security. When investing in a real estate syndicate, you'll want to:

Ready to learn more about real estate investing? Join Royal Investing for weekly meetings to level up your investing education.

Qualified Opportunity Zones

Are you a real estate investor looking for a new way to maximize your returns? Qualified Opportunity Zones (QOZs) may be your perfect investment opportunity.

John Berlet, Fund Manager of Coastal Bend OZ Fund LLC, recently gave a presentation titled: Qualified Opportunity Zones at the Royal Investing. The information overviews the benefits of investing in Opportunity Zones and how to get started.

This article will explore QOZs, how they work, and how investors can exploit them. We'll also discuss the potential tax benefits of investing in QOZs and provide some tips on getting started.

What Is A Qualified Opportunity Zone?

Qualified Opportunity Zones (QOZs) are economically distressed communities where new investments may be eligible for preferential tax treatment.

Tax Benefits Of The QOZ Program

The Qualified Opportunity Zone (QOZ) program was created in 2017 as part of the Tax Cuts and Jobs Act to encourage economic growth in underserved communities. 

The program provides tax incentives for investors who make long-term investments in these areas:

Benefits Of Investing QOZs

Qualified Opportunity Zones (QOZs) offer long-term investment opportunities for taxpayers looking to defer and reduce capital gains taxes:

How To Find Investment Opportunities

QOZ investing can be a great way to impact the community while earning tax benefits positively. To qualify for QOZ investing, low-income communities, and certain neighboring areas must meet specific population requirements defined by census tracts.

To identify eligible census tracts for QOZ investing, you'll need to look at the list of designated Opportunity Zones released by the Secretary of the Treasury in July 2018: 

How To Form A Qualified Opportunity Fund

Forming a qualified opportunity fund (QOF) is essential for investors looking to take advantage of the tax benefits of investing in designated opportunity zones. The process involves filing IRS Form 8996 and submitting it with your federal income tax return.

Once you have filed Form 8996, you will need to make sure that your fund meets the following requirements set forth by the IRS:

Key Takeaways

Qualified Opportunity Zones (QOZs) offer real estate investors a unique opportunity to invest in economically distressed communities and receive preferential tax treatment.

The program encourages investment by allowing investors to defer capital gains taxes on their investments and offering the potential for permanently excluding capital gains taxes if they hold their assets for at least ten years.

QOZs provide several other benefits, such as:

These advantages make QOZs an attractive option for real estate investors looking to maximize their returns while helping to revitalize local economies. 

Are you ready to take your education to the next level? Join Royal Investing Group Mentoring and learn from industry experts.

Compound Your ROI With The 1031 Exchange

Are you a real estate investor looking to increase your return on investment (ROI)? A 1031 exchange may be the answer. 

A 1031 exchange, a like-kind exchange, is a tax deferment strategy that allows investors to swap out an investment property for another and defer capital gains or losses. Instead of paying taxes on the sale of your property, you can reinvest the proceeds into another property and continue to compound your ROI.

At our Royal Investing Summit, Dan McCabe, Co-founder and President of Exchange Resource Group, shares his 40 years of experience in handling 1031 exchanges and how they work as an investment strategy. 

In this blog post, we'll discuss what a 1031 exchange is, how it works, and what rules you need to follow to take advantage of this powerful tax deferment strategy. 

How Do You Defer Capital Gains Tax With A 1031 Exchange?

When selling an investment property, a 1031 exchange allows you to defer capital gains tax by reinvesting the proceeds into a similar type of property:

What Are The Rules And Regulations For a 1031 Exchange?

A 1031 exchange, a like-kind exchange, is a tax deferment strategy that allows investors to swap one investment property for another and defer capital gains taxes. 

Here are the rules and regulations of a 1031 exchange:

Imaginative Ways To Use A 1031 Exchange

There are more imaginative ways to use a 1031 exchange than a traditional one.

Reverse 1031 exchanges, Reverse Improvement Exchanges, and Reverse Construction Exchanges are all viable options that can help you maximize your gains while minimizing your taxes.

Reverse 1031 Exchange

A Reverse 1031 Exchange is a tax deferment strategy that allows real estate investors to trade one investment property for another without incurring capital gains. 

Here are important points to consider when looking into a Reverse 1031 Exchange:

Reverse Improvement Exchange

A reverse improvement exchange is an advanced exchange that allows taxpayers to acquire their intended replacement property before selling their current property.

It combines a reverse 1031 exchange and an improvement 1031 exchange. 

Here are some key points about this type of exchange:

Reverse Construction Exchange

A reverse construction exchange is a combined strategy that allows an investor to acquire their replacement property first and improve it before selling the relinquished property. 

It involves the following steps:

Key Takeaways

A 1031 exchange is an excellent tool for real estate investors to defer capital gains tax and free up more capital for investment in the replacement property. It's essential to remember that exchanges must be appropriately structured and adhere to all IRS rules, but when done correctly, they can provide significant tax savings.

For those looking to learn more about 1031 exchanges, Royal Investing Group Mentoring offers resources and guidance on how to take advantage of this powerful tool. Join us and start taking control of your financial future!

RV Park Investing Boom

RV park investing has become increasingly popular among real estate investors. RV parks offer an excellent opportunity to diversify your portfolio and maximize profits. 

Paul Moore, Founder and Managing Partner of Wellings Capital, presented during the Royal Investing Summit explaining RV Investing and the lucrative lessons we can learn from the investment strategies of Warren Buffet, Sam Zell, and Blackstone.   

In this article, we'll explore why investing in RV parks is profitable for real estate investors.

RVs and RV Park Trends

RV park investing may be a solid addition to your portfolio because of the rising popularity of RVs. For instance: 

RVs are becoming increasingly popular due to the freedom and flexibility they offer. With an RV, you can explore new places, enjoy the great outdoors, and have home comforts wherever you go.

According to the Go RVing RV Owner Demographic Profile, Millennials are particularly drawn to RVs as they provide an affordable way to travel while still having access to modern amenities such as Wi-Fi (suitable for remote working) and air conditioning. Additionally, with peer-to-peer rental services on the rise, more people are discovering how convenient it is to rent an RV for their next adventure.

Why Invest In RV Parks and Manufactured Housing Communities?

RV parks have distinct advantages for an investor, including the following: 

Mobile home park investing is an attractive option for real estate investors because of the following reasons: 

Surprise Factors For RV Growth

One surprise factor for RV growth is remote work. Living in an RV and remote working is becoming increasingly popular as more people seek the freedom to travel and work simultaneously. With the right resources, finding remote and freelance work while living in an RV is possible. 

Another surprising factor for RV growth is the proliferation of AirBnB, Uber, and other types of sharing economies. Two new websites make RVs more accessible to people: 

What Are The Types Of RV Parks For Investing?

There are four types of RV Parks: 

  1. Overnight and campground parks
  2. Extended stay
  3. Workforce housing
  4. Destination parks

Overnight And Campground RV Parks

This type of RV park is for travelers on the move: 

Extended Stay RV Parks

An extended stay park is for semi-permanent placement of an RV: 

Workforce Housing RV Parks

This type of RV park is a bit more obscure and less common: 

Destination RV Park

A destination RV park caters to the population that visits RV parks for vacation: 

There are significant value adds and abilities to enhance revenue by using: 

Destination parks carry major capital expenses and need staff. Thus it has significant barriers to entry and some risks associated with it. 

Key Takeaways

The number of people looking for ways to explore the outdoors and enjoy nature while still having access to modern amenities drives RVs and RV park growth. The proliferation of remote work and the impact of the housing crisis contributes to the popularity of RVs as well.  

RV park investing can be a great way to capitalize on this trend, as it provides an opportunity to offer a unique experience that combines the best of both worlds. With more people wanting to escape their everyday lives and explore the great outdoors, RV parks are becoming increasingly popular and can be a profitable investment.

Are you looking to invest in RV parks or have other questions about real estate investing? Join Royal Investing group mentoring to receive expert advice and strategies to help you navigate your real estate investing journey.  

AI In Assisted Living Facilities

This article will discuss AI in assisted living facilities and its impact. AI is rapidly becoming a part of life. It's becoming more intelligent and impacting many aspects of society and business.

Ron Galloway, researcher, author, and speaker, discusses disruptive technology and its ramifications for assisted living facilities. Watch the presentation about the emerging possibility of AI in assisted living facilities. 

What Is Artificial Intelligence?

Artificial intelligence (AI) is simulated human intelligence processes by machines. Currently, AI most often refers to computer systems that simulate human intelligence. 

Some examples of AI that we interact with regularly include:

AI has some exciting and controversial buzz because it's becoming more sophisticated and may be approaching "sentience."

What Is AI Sentience?

Sentient means being conscious or having the ability to experience what is happening to itself. For AI to become sentient, it must be virtually identical to human intelligence. That means AI would be able to perform tasks better than humans and appear to understand the human experience.

How Does AI Become Sentient?

AI is becoming sentient because of its computing power and ability to learn from text, images, and other media types. AI can be trained to react using natural language and may learn to think, perceive, understand, and feel instead of just language and output.

Why Is AI Getting So Smart So Fast?

AI may be getting smart fast because it understands images. Images on the internet are readily available and pumped into AI, helping AI learn. 

Investing in Assisted Living Facilities

The conversation about AI and assisted living facilities is essential in the context of investing in those types of facilities.

We are on the precipice of a silver wave as baby boomers age into residential assisted living facilities. The reality is that people will need a place to stay as they age. In addition, modern medicine is improving the quantity and quality of life for people, so they will need to have somewhere to stay for longer. 

Read our articles:

It’s critical to learn more about the advantages of these types of properties and how they might benefit you as a real estate investor.

Why Does AI Matter For Assisted Living Facilities?

AI matters for assisted living facilities because it collects data and makes predictions. For instance, a senior citizen may wear an Apple Watch or Fitbit, which collects data about the senior. 

The watch collects height, weight, blood pressure, and heartbeat data. Using that data and comparing it to data that it has available enables AI to predict or diagnose a potential problem–like a heart attack or stroke before it occurs. That helps assisted living facilities to be proactive with their care towards residents. 

Other applications of AI in an assisted living facility include:

The more data that an AI collects, the more the AI can learn and create sophisticated responses. It gets smarter. 

How Does AI Affect The Lives Of Seniors?

AI has the potential to learn about specific communities. That means it will collect data on the following: 

With that data, it will be able to curate experiences and living conditions that are unique and specific to each community. The ability to curate experiences will improve quality of life and has the potential to make data-driven decisions that will cut costs and prevent superfluous waste of resources. 

Some other things that AI might be able to do include, but are not limited to, helping seniors: 

What Are The Biggest Issues AI Can Solve In An Assisted Living Facility? 

There are two significant issues that AI can counteract in assisted living facilities: 

  1. Loneliness
  2. Increasing creativity

AI can counteract loneliness by having it talk to you in a voice that you find comfortable. For instance, AI can read a book in a loved one's voice. 

One thing that hurts people as they age is the lack of creativity. AI can bolster senior creativity with its ability to augment its natural knowledge or synthesize inputs to create something new. 

Key Takeaways

AI is here to stay and will increase its presence in our lives. The ability to harness and use AI in unconventional and creative ways may define how we progress as a society. 

Although it's not as flashy as self-driving cars, the application of AI in assisted living facilities is essential. AI has the potential to improve the lives of seniors in those types of communities by: 

Do you have questions about assisted living facilities? If so, join us at our weekly Royal Investing Group Mentoring, where we discuss best practices, investment opportunities and facilitate a space for networking with like-minded people. 

Solo 401k: The Biggest Tax-Saver

A Solo 401k is the biggest tax-saver for real estate investors. No one likes to pay taxes, but like death–they’re inescapable.

We can’t help you escape death (we can help you plan for it), but we can help you minimize some of the onerous tax burdens you may incur due to your earned income. 

Watch Pete Schindele, CFO and CPA of Royal Legal Solutions, discuss why investors love the Solo 401K in his Royal Investing Virtual Summit presentation, Solo 401k: The Biggest Tax Saver.

In this article, we’ll discuss the features of the Solo 401K, who needs it, why the Solo 401K is the biggest tax-saver, and how to use a Solo 401k to build wealth. 

Solo 401k: Features, Myths, and Benefits

What is a Solo 401k? It’s an individual 401k that primarily benefits a business owner with no employees. 

The IRS disallows you from contributing to a Solo 401k if you have any full-time employees in your business. But you can use the plan for both you and your spouse. 

Features of a Solo 401k

Here are the basic features of the retirement plan: 

Myths Surrounding Solo 401k Plans

Myth: I can’t have more than a retirement account.

Truth: You can have more than one; it’s legal, and you act as the fiduciary. 

Myth: I’m too young to think about retirement.

Truth: You’re never too young to invest in retirement and get returns on any amount you set away in your Solo 401k.

Myth: I don’t have enough money to plan for retirement.

Truth: Some money is always better than no money in your retirement account; if you fail to plan, then you are planning to fail–especially in retirement.

Benefits of Solo 401k

Who Can Use A Solo 401k As Their Biggest Tax-Saver?

That depends on where you are on your journey. However, a Solo 401k is a powerful tool for real estate investors. As such, real estate investors need a Solo 401k because it enhances their real estate investment returns.

The Solo 401k is an integral part of the bigger picture regarding securing your financial future. It’s part of a comprehensive ecosystem geared to generate wealth and provide asset protection so you can: 

How To Purchase Property With A Solo 401k

Purchasing property with a Solo 401k makes this retirement plan a powerful tool for real estate investors. 

  1. Open A Solo 401k: You create a Solo 401k with an EIN and signed plan documents.
  2. Fund The Solo 401k: Fund it in various ways by:
    1. Making annual contributions
    2. Transfer from qualified plans
    3. Rollovers from Traditional IRAs, SEP IRAs, SIMPLE IRAs
  3. Determine Purchasing Method For Property: You have four options using a Solo 401k to invest in physical real estate. Each method has specific guidelines and rules:
    1. Cash purchase
    2. Debt financing: Get a nonrecourse loan to purchase a property
    3. LLC: Solo 401k housed within an LLC 
    4. Tenancy In Common (TIC): With a partner
  4. Put Your Offer Together: Your Solo 401k makes the offer on the property. You (the trustee) sign for the plan, and the earnest money deposit comes from the Solo 401k. 
  5. Close On Property: When you close, you (the trustee) approve and sign the property purchase documents and submit them to the closing agent. The Solo 401k wires or cuts a check for final funding. 

Managing Real Estate Bought With A Solo 401k

Once you buy a property with the Solo 401k, the plan manages the property. That means that the Solo 401k pays the bills, including: 

Never mix personal funds with Solo 401k funds; otherwise, you may trigger a massive tax event.

What about rent?

You must deposit rent checks directly into the Solo 401k account. In addition, you cannot use the rental income personally. If you withdraw the funds for personal use, it becomes a taxable distribution. 

Key Takeaways On The Biggest Tax-Saver

A Solo 401k is the biggest tax-saver for real estate investors. It allows you to control your money and offers excellent tax benefits. 

Moreover, a Solo 401k is especially beneficial when you use it to purchase real estate as it gives you unique benefits and tax-sheltered income. All in all, a Solo 401k is a robust retirement plan that generates wealth. 

Do you still have questions about how you can leverage a Solo 401k in your real estate investing journey?

Join us for our weekly Royal Investing Group Mentoring so our expert contributors can answer all your questions, dish out additional information, and provide best practices to help you succeed. 

Connecting Private Lenders With Borrowers

Investing in real estate can be challenging. It's a harsh industry, especially when it comes to securing capital. Connecting private lenders with borrowers may be a solution for real estate investors. 

Private lenders aren't for everyone. But, in certain circumstances, they may be right for you. Chris Naugle, Founder and Owner of The Private Money Club, explains in a Royal Investing Virtual Summit how his company and other private money lenders connect with borrowers and provide them the capital and solutions they need. 

What Are Private Lenders?

Private money loans, more commonly known as private money, are loans offered by a private organization or even a wealthy individual to another person or company. These individuals and organizations providing such financial help are called private money lenders.

Private lenders allow you to secure funds outside traditional banking or lending qualifications. However, due to relaxed regulations, these loans can be risky for both parties, so due diligence is required. 

Who Can Be A Private Lender?

Since a private lender is anyone who has money to give you that isn't a bank, a private lender can be any of the following: 

If you're looking to buy a property, attend to much-needed renovations, or prep a home for reselling- private lenders might be the perfect fit.

How Do Private Lenders Evaluate Borrowers?

Guaranteeing a solid return on investment is of the utmost importance - and that means mitigating any risk involved. Before providing capital to potential borrowers, they analyze various factors such as:

A Borrower's Choice: Private Lenders vs. Banks

Why would you choose a private lender over a bank? 

Banks and credit unions typically don't lend to rehab projects or other investments for flippers - the property must be in good standing to receive conventional financing. That might kill a lot of deals for you. Private lenders are usually more than willing to fund these activities.

Advantages

In most cases, private lenders have lower borrower requirements than a bank. For instance, you may enjoy the following:

There are also some drawbacks when you work with a private lender that you should know. 

Disadvantages

With a traditional lender, you can secure a 30-year mortgage. Private lenders are flexible but usually want their money back sooner than 30 years. 

Another issue is that you may have to pay a higher interest rate than what you'd find at a bank.  

Before taking out a loan, it is essential to vet the source of funds and ensure that those funds are legitimate. Typically, these lenders comprise several individual investors who expect a return on their investment; thus, verifying that your loan won't abruptly collapse is critical for borrowers.

How Do Borrowers Connect With Private Lenders?

Understanding the kind of private lender you seek is integral to beginning your search. Finding the right person may be time-consuming. But don't worry - there are a few approaches out there that can help you connect with a private lender. 

Use your network

Establishing connections through networking is a reliable method for locating private lenders. Use it to find accredited investors, individuals, and financial institutions who can provide your funds.

Look for places you can grow your network:

If you're open to seeking out private individuals, your search options become almost infinite.

Google private lenders

If you're searching for private lenders near you, it's as easy as Googling them. Additionally, dedicated sites such as Private Lender Link can help to locate the right lender for your needs quickly.

Keep in mind, however, that lenders obtained through these searches will most likely receive more offers than lenders found organically. 

What If I Want To Be A Private Lender?

Private lending may be a solid strategy if you're interested in earning passive income. As opposed to investing directly in real estate or business ventures, which require purchasing property and managing the day-to-day operations of a company, private lending allows you to reap the rewards without any of these hassles.

You'll need the required capital to become the bank for borrowers to turn active income into passive income.

Key Takeaways

Connecting private lenders with buyers is a people business. As a real estate investor, you must massage your network to find a private lender. You'll see distinct advantages of working with a private money lender. 

Some of those include: 

There are drawbacks, so you must do due diligence when looking for a private lender. 

Do you want to know more about connecting with private lenders or learn how you can become a private lender? Sign up for our FREE Royal Investing Group Mentoring, where we cover all types of real estate investing topics. 

Digital Marketing Tools for REIs

The internet has revolutionized business, especially for real estate investors. Web presence, SEO, and Google Ads are handy and powerful digital marketing tools that you must use to stay relevant in an increasingly competitive field. 

Dr. Adam Gower builds best-in-class digital marketing platforms for real estate developers interested in online syndicated deals. He stopped by and shared his expertise on generating leads through your web presence, optimizing your homepage, and how SEO and Google Ads can generate business. 

What Is Online Real Estate Syndication?

Online real estate syndication is a process of pooling money from individual investors to purchase and manage income-producing real estate. Private investors can participate in the deal by buying shares in the entity that owns the property, typically organized as a limited liability company (LLC) or limited partnership. The entity will manage the investment, collect rent, pay expenses, and distribute profits to the investors based on their ownership percentage.

The syndication structure allows real estate owners to raise capital from multiple sources without giving up complete property control. It also allows individual investors to diversify their portfolios by investing in professionally managed real estate assets with high potential returns.

Why Does Digital Marketing Matter To Real Estate Investors? 

Digital marketing starts with your online presence. Crafting a professional online presence through your website presents more than just an opportunity to publicize your brand and gain trustworthiness. It also gives potential investors easy access to discover what you offer - all from the comfort of their homes.

A marketing funnel is a visual representation of the customer journey, from first contact with you all the way through to purchase. It comprises distinct stages, each representing a step in the process. You can use different tactics and strategies at each stage in the funnel to draw customers further down until they reach the conversion.

Quality content that addresses a customer’s pain points can effectively draw customers through the funnel. Content should not just focus on selling but on educating and providing solutions to your potential investors. High-quality, informative content will draw people in and eventually lead them to become investors.

How Does SEO Impact A Real Estate Investor?

SEO stands for Search Engine Optimization, which is optimizing a website to increase its visibility and traffic from search engines. 

By using a combination of on-page and off-page optimization techniques, such as: 

Keyword Research

Keyword research is the process of finding and analyzing keywords that are relevant to your business or industry. 

This process involves conducting keyword searches using tools such as Google Adwords, Keyword Planner, and other keyword analysis tools to identify popular search terms related to your business.

Link Building

Link building is acquiring links from other websites to your website. The links help search engines understand that your website is reputable and authoritative in its industry, resulting in higher rankings on search engine result pages.

Build links through:

Content Optimization

Content optimization is the process of optimizing existing content for search engines. Optimizing ensures that content has relevant keywords, is well-structured, and is optimized for search engine crawlers and readers. 

Content optimization also ensures the website is easy to navigate and provides a good user experience. Additionally, you should regularly update content with new and relevant information to keep readers engaged and boost visibility. 

SEO helps websites rank higher in search results. This increased visibility brings more potential customers to the website, increasing revenue.

Real estate investors can benefit from SEO by improving their visibility in search engine results and reaching more potential customers. 

Real estate investors can increase their website traffic and target specific audiences by optimizing their websites for relevant keywords related to their industry. Link-building and content marketing strategies can also help real estate investors build authority among potential partners. 

Why Are Google Ads Important To Digital Marketing?

Google Ads is a paid advertising platform that enables businesses to create and display product or service ads on search engine result pages. With Google Ads, companies can have their ad appear at the top of search results when customers search for relevant keywords, allowing them to reach more potential customers. The ads are an effective way to drive more traffic and leads to your website. 

Google Ads is an essential tool for real estate investors because it allows them to reach a wider audience and drive more qualified leads. 

With Google Ads, investors can target potential buyers with relevant keywords, allowing them to capture the attention of motivated partners likely to convert. 

Digital Marketing Key Takeaways

The internet has revolutionized how real estate investors reach potential buyers, tenants, and sellers. It has changed the game by:

Web presence, SEO best practices, and using Google Ads are potent weapons in your marketing arsenal. The people leveraging those tools are the most effective in an ever-changing real estate investing landscape. 

Do you want to learn more about best practices for real estate investors? Yes! Join our Royal Investing Group Mentoring to unlock the secrets to success from real estate investors like yourself.