Group Investing to Build Bigger Faster and Make More Money!

I am excited to feature a guest writer to JustAskBenWhy. Douglas Dowell is an accomplished real estate guy, a fellow writer on BiggerPockets.com, and an all around nice guy!

Money_Monopoly

*Consult legal counsel before acting.

You’ve got the basics of real estate investing down. You know how to spot a great deal. Now what? Real estate investors from Donald “nice hair” Trump to the neighborhood fix and flip Investor all face the same problem. More great deals than their own equity will support.

The investor then must use two options: stay small and grind it out over time or choose a group investment vehicle to go bigger faster.

The purpose of this article is to give a brief overview of the group investing options. We will first look at the traits required for a successful group investor. Second we will briefly describe the decision making process on whether you wish your group investment to qualify as a security.

There are four central traits required for successful group investing:

1. Can I make really great deals? Poorly structured deals that fail are the basis of most securities enforcement. If everybody made money no complaints right?

2. Do you want to be responsible for others money? Money and emotions go hand-in-hand. Are you willing to accept that fact? Are you willing to manage others emotions on this point?

3. Are you willing to be selective? Friends and family are often cited As a great source for private money. Is that wise? Is it wise to let someone invest 100% of their net worth in your business? Are you willing to turn down widow and orphan money?

4. Do you have an abundance mentality? Do you believe that money is everywhere to invest in your great deals? It is…over 1 TRILLION was raised in just one segment of the private money arena.

If you believe you possess the four traits you’re ready for the next step.

What vehicle should I use for my group investments?:

The best way to answer that question is to determine if your investment will be a security? The SEC vs Howey case provides the basic frame work for determining if it is a security if the structure does the following:

1.Investment of money due to

2.an expectation of profits arising from

3.a common enterprise

4.which depends solely on the efforts of a promoter or third party

Whether you want to trigger the fourth question is the central question for investors.

Will my investment depend solely on my efforts? If so then you will need to comply with the private placement rules of your State and the Federal Securities regulations. If you do not wish to undertake the legal expense of that option then consider a joint venture or LLC structure where all the members:

• make a joint decision

• participation is documented

In conclusion, the superior way for investors to transition to bigger investments faster is a group investment. For most, the optimal way will be an LLC or joint venture structure. You’re on your way to being Donald Trump….with better hair!!

…………………………………………………………………….

Douglas Dowell J.D. is commercial and multi-family investor.  His areas of expertise are raising money legally, risk mitigation with due-diligence, and management science.  Douglas is an avid student of success principals with a focus on modeling success factors.

 

Connect with Douglas at:

http://www.linkedin.com/in/douglasdowelljd

eMail: [email protected]

 

5 Comments

  • Ben Leybovich Reply

    Excellent article Douglas. “Not enough money” is by far the most pressing limiting factor in all of our businesses, which is why my focus is on creative financing. What your post is about is creative finance on steroids – Love it!

    Thank you so much. I look forward for more from you!

  • Douglas Reply

    Thank you Ben! I do love the creative techniques you teach. I believe winning in life is having more options. Your approach and mine both offer more options to real estate investors. Winning!

  • Brandon Turner Reply

    Thanks Douglas for the post! Glad to see you posting around the web! I definitely need to start getting more into this kind of investing – with others. It’s been such a “one man show” for me, but to take it to the next level, I’m really gonna need to start branching out. Who knows – maybe that’s the future of BP! 🙂

    One thing that really stood out to me was your line about “Do you have an abundance mentality? Do you believe that money is everywhere to invest in your great deals? ” – this took me sooo long to grasp. I live in a lower income area, so I kinda just assumed everyone in the world was just as broke as my neighbors. It’s amazing, though, how much money there is out there – and the low returns that a lot of people are getting from their investments.

    Good stuff fellas! Thanks Ben for letting Doug write this! Now I’m jealous – I may have to bug you to write here as well.

    • Ben Reply

      Hey Brandon,

      It might have been a one-man show – but, what a man… 🙂

      I could definitely see a future for BP on this side of the tracks. After all, my job on JustAskBenWhy and BiggerPockets is to help educate people on making a wise decision. But, having done that, most are still too busy to manage investments on their own – Hello Syndication!

      And Brandon – I don’t think I can stop you from writing here…lucky me!

    • Douglas Dowell Reply

      Thanks Brandon! Its all about the take away close….until we believe in our soul we are offering a true opportunity it will come across through our body language when we make the ask.

      The take away close is very effective because humans value that what is perceived to be scarce. We have to be and believe we offer excellence. Both you and Ben are there. Very happy to count you as colleagues and friends.

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