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:
- Construct the PPM
- File the Form D
- Collect investments
- File the state forms
- Close the offering
- Use the investment capital