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Reg D for Real Estate

Since one of the choices on a Form D is “Tenants in Common” it’s obvious that real estate can be considered a security. That aside, most real estate investors use part cash and part financing on projects.

Regulation D has long been used by savvy real estate developers who take private investments from local private investors. With particularity, Reg D Rule 506(c), the newest addition to Reg D via the Jobs Act, opens up a whole new window of opportunity.

Any amount of money can be raised using this rule: $25,000 to $25B+. The amount is unlimited. An offering can be structured the same way any other offering is structured. Debt (private loan), equity (selling shares of your company, or equity in the property), or a combination of debt and equity.

Most of these entities are set up as Limited Liability Companies for tax purposes, and sell Units (or shares) of Membership.

The offering is prepared and filed like any other Reg D Offering as follows:

  1. Construct the PPM
  2. File the Form D
  3. Collect investments
  4. File the state forms
  5. Close the offering
  6. Use the investment capital
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Definition of a Security

What is the definition of a security? It is any item promised as security for an investment of capital money.

The following items can be considered securities:

  • stock shares
  • any percentage of ownership sold to another person or entity
  • promissory notes
  • memberships (such as in an LLC or Partnership)
  • real estate
  • debentures
  • options
  • warrants

Regulation D Offerings are used for a wide variety of offerings and industry types:

  • corporate seed capital
  • corporate expansion capital
  • film production / entertainment capital
  • real estate equity funding (acquisitions, development projects, rehab)
  • capitalization for early stage Internet and technology companies
  • expansion capital for retail businesses, marketing, product development and distribution funding