The private placement memorandum
that's kind of like the big

document the syndication
attorneys work with, that we

give our clients it's aside from
the operating agreement, which

really makes the investment
entity work itself. The private

placement memorandum is a
absolutely critical document.

What does it do? Well, in
summary, what it does is it

allows the syndicator, the fund
manager, the business raising

capital, it allows them to give
to potential investors, an

identification of all the terms
of the investment, identify

risks, identify conflicts of
interest, all for the purpose of

allowing that prospective
investor to make a good decision

for themselves about whether or
not to exist, it is a benchmark

at Keystone in private
offerings, it is an absolutely

critical document, it is
absolutely required for non

accredited investors. And even
though it is not required for

accredited investors itself,
there is hardly a private

offering under 506 C, or even
506 B to only accredited

investors, that doesn't use
them. Why? Because it's such an

important document. It's the
document when the bottom falls

out, and you needed the most you
can say hold it up and say this

is what I told you about the
investment. It is your Get Out

of Jail Free card because you
don't belong in jail, when

you've got this document, you've
shown the investors all the

things that really can go wrong,
you've identified all those

terms. So in this video, here's
what we're going to do, we're

going to go through in detail,
the 10 major sections that go

into a private placement
offering, I know you're gonna

find it helpful. And it's really
just like a list of all those

things that are there and the
things that I think about as a

syndication attorney when I
draft him. I hope you enjoy this

video. As a note for my podcast.
As a note, from my podcast

listeners, I want to say thank
you. This is our 100th episode.

That's why I did such a long
talk for you. I wanted to make

sure that you have that. And I
wanted to say thank you, you

listening to my podcast means a
lot to me, I enjoy speaking to

you. And we've helped a hundreds
and hundreds of people along the

way, do their own deals. And
generally, I believe putting

this kind of good information
out into the world is the right

thing to do. So thank you. Thank
you very much for enjoying my

podcast, I hope you keep
subscribing tell your friends,

get them to subscribe. Again,
thank you for being here. 100

episodes, wow, that is a big.

So the private placement
memorandum has a lot of parts.

Now we're going to talk about
the 10 biggest parts, and how

they function and what their
role is. Now this doesn't

necessarily mean that they have
to be in this section. And it

certainly doesn't mean it needs
to be in this order. Because

when I draft them, they're
definitely not in this order.

But I thought it was the
clearest organization to talk

with you about how to organize
what a private placement

memorandum is, what that thought
process is because it really

goes to the, again, the heart of
what the investment is, and the

purpose of that of that PPM to
describe those conflicts that

risk those terms in a clear and
concise manner. So without

further ado, the first big kind
of topic area of a private

placement memorandum is the
summary of terms. So this is the

terms of the investment. Now, it
does a lot of things underneath

the summary of terms, if you've
seen them most often it's

structured as a table. That's
how I write them as well. And in

that table, we're doing things
like we're identifying the

investment entity itself, we're
identifying who the manager is.

But we're also involved
identifying that investment

objective. So we're putting it
in the summary of terms to make

it clear and called out right
here, that the objective of this

investment is to make returns
for its investors. So it's a

security right, that's the whole
purpose to make, make funds make

money for our investors is to do
that and in some manner. So we

describe in some detail about
what that objective is and how

it's going to be achieved. So
maybe if I identified specific

terms, sometimes we put that in
here as well, I mean, specific

goals, some targets that you
want to hit in terms of IRR or,

or multiples or things like
that, that oftentimes goes here

as well. Another Creek, Cara
absolutely critical part of the

summary of offering terms is Who
exactly is able to invest? Who

are those eligible investors?
Now, this is either one of two

answers, or both. So yeah, well,
it's so it's either accredited

investors. So accredited
investors are those people who

meet the requirements of
Regulation D, rule 501, they're

identified there and 501 A, who
those accredited investors are.

So briefly, that's the, they
make 200 or $300,000 of income

for the past two years with the
expectation of the third year,

or the current year to make that
same amount, it's $300,000, that

for counting the spouse, or they
have the net wealth of over a

million dollars, not including
the value or any equity in the

private or primary residence,
because negative equity Does,

does have an effect. But any
positive equity does not. So

that's the accredited investors
eligible investor time, now,

almost always, you're going to
be taking them because why

wouldn't do the other group that
is that can be available for a

four a five is for a 506 b
offering. And those are your non

accredited investors. Those are
simply those people who have not

reached the level of the
accredited investor. Now, they

must be known to you and they
must have some level of

sophistication about business
and about investing. So they

must meet a minimum threshold in
order to invest, you wouldn't

want to take somebody who's
never balanced a checkbook in

their life and put them in as a
non accredited investor, they're

probably not sophisticated
enough. Not that they're bad

people, they just don't fit into
the criteria, and probably

shouldn't be investing. But
those, those people should be

there. The non accredited
investors, if you're doing a 506

b offering, may very well be an
eligible investor in. And then

like I said, third category is
both. Most of the time if you're

doing a 506 b offering is going
to be both you'll both have non

accredited investors, which is
limited in their 506 beat to 35

of them in any 90 day period,
and an unlimited number of

accredited investors. If you're
doing a rule 506 C offering,

you're just taking an unlimited
amount of accredited investors,

but they must be verified to be
accredited investor. And so

that's just a quick summary of
what those of what that eligible

criteria is. Another important
term is what's the offering

sighs Are you raising 5 million
10 million 100 million a

billion, it's important for
investors to know because they

need to know what they're
getting into. Right, it's a very

different thing to invest in
something that's going to be

raising a million dollars, if
I'm going to give you $200,000

And your raise is a million,
wow, I suddenly own 20% of this

thing, if you're going to be
raising $1 billion. Now I own

very, very small amount, right?
I own point 2% of this thing. So

much, much smaller. So it's that
what is that offering sighs

number three is really are for
is really the use of proceeds.

Now. Here we expand the use of
Jenner of proceeds greatly. But

here I'm going to speak just
kind of generally about it. I

normally put a section in my
terms that says we're going to

be using these funds for paying
for expenses as well as

investing in the primary assets,
whatever those are, because

remember, this isn't just real
estate that uses these real

estate is a lot of my clients,
but it's not all. So I have an I

have clients that invest
directly capital into their

business. I have ones that build
funds, or hedge funds or things

like that. They're all buying
different asset types, and

they're using the funds in order
to buy those kinds of things.

Another main term is the
estimated hold period. So I give

you $200,000 How long are you
going to be using those funds in

this investment before I get
back? Is this a three year deal?

A five year deal a seven year
deal? A one month deal? It's

kind of important for me to know
so I have an expectation of of

how long it's gonna be tied up.
If you leave left this out.

You're gonna have a hard time
finding investors because they

have no idea what they're
getting into. Right if I give

you $200,000 I kind of want to
know Another Creek key term, and

probably the term of the
offering that investors flip to

first is what the distributions
look like. I mean, we're giving

you this money in order to get
those distributions. So what do

they look like? Am I getting a
preferred return with some sort

of water? Am I getting straight
equity that's getting split out

some way? Am I getting basically
a preferred security? So it's

paying out at a fixed rate? I
want to know, I want to see the

language so I can understand
what exactly it is. So that's a

very key piece of information
for me. What do the expenses

look like? Am I getting if I
invest in your business? Is my

money going to be used for what
kind of expenses? Is it going to

be used for your as the
syndicator at for your office

space in your personal
assistant, kind of important for

me to know that is, is are one
of the regular expenses going to

be paying for, you know,
preparation of tax returns, most

of the time it is, but it's not
always that kind of like to

know, well, what is all this
money that I'm providing you

going forward. And along the
same lines of expenses, this is

also where we talk about
management fees. Now we have

lots of different kinds of fees
that oftentimes get baked in,

not always so I still some, I
prepare some private placement

memorandums with no fees, no
management fees whatsoever,

which is certainly an option,
certainly a good marketing

advantage. But it's not, it's
actually more common to have

some sort of feeds. So asset
management fees, property

management fees, if it's a real
estate deal, acquisition fees to

buy the the asset, disposition
fee to sell the assets, finance

fees, if there's outside
financing being provided. These

are all kinds of fees that are
that exist, that are common. And

they need to be put here, they
have to go into a private

placement memorandum, obviously.
But this is normally where we

identify where those what those
fees, what that fee structure

looks like.

Another key term are is
transferability of membership

interest. Now remember, under
Regulation D, these things

these, the security is not
freely transferable. So that's

why cryptocurrencies oftentimes
don't work. Because you have if

you have a cryptocurrency by its
very nature, it's had its

tokenized to make it freely
tradable. Regulation D

offerings, regulation, D
securities are not supposed to

be freely tradable, is right
there in the rules. So this is

normally where we talk about
those things, there are major

restrictions on the
transferability. Now the purpose

of those restrictions is really
just to reduce the the

possibility of a secondary
market being created. That's

really the goal of the SEC here
is to restrict it. So there's

not like these mini stock
markets all popping up all over

the place, where people are
trading on their private

placement offerings, just on the
value of the stock, or the of

the units that there are, they
should only be an investment

should be geared towards driving
the business and towards the

business goals of what ever it
is. And I don't mean

specifically a business because
it can be. But it doesn't always

mean it can also mean a real
estate thing or a private equity

fund or something like that. But
the goal is the money should be

driving that not not speculation
on the value of the security

itself. That's why it's
restricted, it is not allowed.

Another key item here is income
tax considerations. Most of the

time, for a for a non business,
we're talking about these file

partnership level tax returns.
So if they're new, most of the

time, the entity choice will be
an LLC, and they'll file a k one

and you'll get K ones for each
investment that you make. And

then lastly, for the major terms
that I put in and this is just

high level, there's actually
quite a few more, but I want to

give you a brace like broad
overview is governing law. So

I've got a problem. I invested
in your in your entity, and I've

got a big problem and I'm going
to file a lawsuit. Well what law

governs here? Is it the state
where I am is it the state where

you are is a Delaware is it
Wyoming? Is it Texas? Is it New

York? Is it California? Where is
that? It's a very important

point because if things go very
bad I need to know it's a major

term choice of law is always a
major turn. Lawyers love it

because it's a major topic for
us. we study it in law school

for a whole year. And so that's
why it ends up in your

agreements. But it also is very,
very important. And so that's

why it's included under the
summary of terms. The next major

topic, other after summary of
terms, is the disclosures of

risks and conflicts of interest.
This is a major part of a

private placement memorandum.
Its job is to make sure that

investors know what they're
going into. Now, I oftentimes

tell clients this, and I'm not
really joking when I say it,

although it's true, is if I were
to draft the perfect risk

statement, it would look like
this. Dear investor, you are

going to lose every single
penny, I guarantee it, we're

going to keep it all no matter
what if we make any and you will

lose every penny. Now, if I
could draft it that way, it

would be great because Boy,
wouldn't it protect your wealth,

no matter what happens, you're
right, the investor doesn't get

their money back. Of course, no
investor is ever, ever going to

invest in that. Why? Because
they're investing in it to get

money. So we need to give a
proper picture of the risks and

conflicts of interest that
exist. So let's talk about

risks. First, when we're talking
about risks, we're talking about

reasonably foreseeable risks
that could happen. Now, I'm not

going to put in the in a PPM
that there is a risk that the

moon is going to fall out of the
sky landed in the ocean and

closet tsunami, which is putting
the money at risk. I don't think

that's likely to happen, could
it? Probably not. But I guess,

you know, in the in a quantum
mechanics world, maybe there's a

practically a nonzero answer
that it could happen. Or if

you've seen the movie,
Oppenheimer, you know, there was

a nonzero risk that the bomb was
the atomic bomb was going to

blow up the entire world. It's a
nonzero risk, it's there, but

you're not gonna put it into a
private placement memorandum.

We're putting in reasonably
foreseeable risks. Now here

we're talking about like
business risks. So the big kind

of overarching risk, that's
there for sure is, hey,

investor, this is an investment
investments, by their very

nature are inherently risky,
otherwise, there would be no

return. You don't get no risk,
no reward, right? So this is an

investment and your money is at
risk, you may lose money, it's

possible. So that's sort of like
the broad overall business rate

US business risk that exists.
But there's also other risks,

things like, when we talk to
investors, we're oftentimes

leaning on our past experience,
right? So my experience, I

personally have done quite a
number of deals, I have a very

good track record of generating
returns for my investors. But

that past history, the results
that I got in the past, for my

investors are the past, it
doesn't mean that my next

venture is going to be
successful. I'm gonna try my

darndest to make sure it is
successful and wildly

successful. But just because I
had success in the past doesn't

guarantee that in the future,
I'm going to have the same it's

it's, that's, that's one of the
risks that you also need to make

sure investors know. Another key
risk is you as a syndicator, are

bringing to this deal, you're
putting this thing together, and

you're using all your talent,
your skills, all all those

things that make you special,
into this investment. Right. And

that's why investors are making
this decision because of you.

Ultimately, the end of the day,
that's the decision that they're

making. They're trusting you to
do this. So you are a key person

to this investment. And there's
no guarantee that you're gonna

be here next week, in order to
keep it running. Right? Meaning

you're gonna you want to be,
you're gonna try to be, but you

never know when that bus is
going to be barreling down Main

Street. So it's a risk that
exists. It's a risk that needs

to be disclosed that hey, we've
got these key people, like

including you that exist, and
they're very important to the

operations. We can't make a
certain guarantee that they're

going to be with us always.
Another key risk and we actually

talked about under summary of
terms and that's the lack of

liquidity. So basically, because
we can't freely trade this,

because there's no public market
for these securities, I can't

just go and sell them on Wall
Street. Right? It doesn't exist

to do that. So the investors
need to know, there may be a

situation where you really wants
your money back. But you just

can't get it, you just can't
find a person who's going to buy

it. Maybe the managers got their
money all tied up, maybe all the

other investors or have their
money all tied up, and you just

can't sell it. It's not a liquid
asset. And the investors just

need to know that that's just
the reality of it.

Of course, there's always income
tax risks. We don't know what

taxes are going to be in the
next few years. Maybe they'll

they'll be more favorable, maybe
there'll be less, it doesn't

really matter for the purposes
of rafting and ppm, other than

this let investors know, hey,
we're drafting this based on the

tax situation that we know
today. Today, if it's real

estate, we know we can
depreciate the property, we know

that exist, it's a reality
thing. Maybe that will go away.

I don't know. Maybe they will do
away with 1031 exchanges? Don't

know, it's just a reality that
it may happen. And investors

need to know it. Now, why do
they need to know these risks?

Because what if some one of them
happened? Right, and they're

very mad. So let's say that they
didn't really understand about

the liquidity thing. Right? They
didn't understand that these are

illiquid, they didn't see that
section on your summary of terms

that, that there's these
restrictions on or they didn't

draw the conclusion of what that
meant for them. Well, something

happens in their life, and they
need to get that cash out. This

is their only pool of cash, and
they need to get it. So they

come to you and they say I gotta
get this cash out right now. Oh,

I had a life event that requires
it. And they are earnest and

really, really need it. But
you're in a situation at that

point, time point where you
can't help them out and no other

investor can help them out.
Well, what do you think their

complaint is gonna be? Why
didn't you tell me that these

are illiquid? Why didn't should
go through and tell me that I

had no idea I would have never
invested if I had known that it

was illiquid. That is why it's
in the private placement

memorandum. So you can hold up
your private placement

memorandum point to the section
and say, I did. See it's right

here. I told you that it's not
it's just not a liquid thing. If

they make a complaint to the
SEC, or a state regulator, and

they get a copy of the PPM, you
can show them and say, I told

them that this was a risk. It's
just the reality that it's that

these things are not freely
tradable. And they'll understand

if they try and take it to a
lawyer and try and sue you,

because Darn it, that's
indicator didn't tell me about

it. The attorney, the
plaintiff's attorney is going to

look at that and be like, it's
right here, you can't, you're

not going to be able to sue,
because of it. It's all over

this document, that it's
illiquid. I'm not gonna take

your case, or I'll take it but
you're gonna have to pay me our

you know, no, one attorney would
take it on contingency because

it's a loser. So that's why
we're so careful about making

sure our risks are well crafted.
Now, why don't we put in every

risk in the known universe? Why
don't we make this like a 10,000

page document that's got risks
that are just crazy and

ludicrous in there? Well, courts
have actually said, You've got

to tell your investors risks,
but you can't bury risks in

other risks. So that's why we
carefully tailor the risks of

those risks, which are
reasonably possible for a that

reasonably foreseeable that
could happen so that investors

can make a decision about those
things that are reasonable. It's

not reasonable that that tsunami
from the moon falling in the

ocean is going to be a big
problem. It's just not. So we

don't put it there. That's why
so I don't list out everything.

Normally, there's quite a few
pages of risks, but it's only

what I think is reasonably
necessary. Is there one or two

or three or five risks? It
depends. But there's more than

five and there's more than 10.
It's probably and I've never

really counted but my guess when
you add up all the different

categories of risks, there's
probably about 30 or 40. That's

my rough guess. So the other
piece of this puzzle is

conflicts of interest. Now, when
you as a sponsor are putting

this deal together, you're
getting paid most of the time

99.9% of the time, you're
getting paid. And when you're

getting paid, there is an
inherent conflict of interest.

So a conflict of interest is
when your needs don't

necessarily match up 100% to the
needs of a, of an investor, I

think the best example of a
conflict of interest that

happens all the time, is the
sponsor, is a property manager.

So that property manager is
making fees, property management

fees on taking care of the
property. In fact, that's the

bulk of what they're making
profit making they're making

their fees on is that management
of the property. And the

investors have identified, hey,
this really actually is a good

time to sell this, this asset.
While the in the sponsor has a

conflict of interest, because
they want to keep this thing

going. They want to keep their
property management job, you

know, servicing the property,
that's an inherent conflict, it

exists, it must be disclosed.
Now conflicts of interest can

exist, not saying that they can,
they always are going to exist.

And it's okay, they just need to
be disclosed, investors have to

know, hey, these are the main
conflicts of interest, I'm

getting paid fees, I'm getting
these things, our interests are

never going to be completely
aligned, I'm going to do my best

to act in your best interest.
But just know, there are

conflicts, that way the investor
can read those conflicts and

decide for themselves, whether
you are going to act in their

best interest or not. If they
don't, they don't have to

invest. If they do think that
you're going to act in their

best interest, then they
probably are going to invest. So

that's why we disclose them,
because they got to be there.

The third big section is capital
uses and expenses. So we touched

on this a little bit above under
summary of terms. But that

breakdown of how the money's
being used is critical for

investors to know, under
Regulation D rule 506. B, when

you have non accredited
investors, it's not only a darn

good idea, it's required that
you make a very detailed

explanation about what those
uses of the funds are going to

be. Now how detailed does it
need to be? Does it need to be

30 pages of forecasts and
analysis and things like that?

No, it needs to be reasonable
enough that the investor can see

for themselves, okay, I'm going
to give them this kind of money,

this money is going to be used
here to buy this asset, some of

this money is going to be paid
for these fees. Some of these

are going for legal expenses
hid, some of this is going for

this, so that the investor knows
what they're buying, right,

they're buying a piece of a
company most of the time. And so

they need to know have a good
feeling about well, this is the

entity that I'm buying, even if
they're taking just a preferred

equity position, like a
preferred stock,

they still need to know, because
it's a very different situation

for me putting money into
something that's going to be

used to buy to basically pay for
you. Versus it's going to be

paid for this Ferrari that's
going to generate all this cash.

Right, there are two different
things. So I need to know that

as an investor. And that's why
the use of funds is very

important. At the same time,
this is also where we talk about

expenses, the kinds of expenses
that are allowed to be spent,

right. So is if we're paying for
the for paying for overhead

management, well, that's a very
important thing. I need to know

that some my money is being used
to pay for that manager. If I'm

getting distributions on money
that's coming from investor

money starting to sound like a
pyramid scheme. I want to know

that I want to see that in
paper. Okay, well, if that money

is getting is getting paid to
me, Well, how is the money

getting replaced on that?
Because I need to know so that I

can make a decision for myself
on whether or not to invest. The

fourth big topic is the details
about the security offering

itself. So this is how many
units are being offered. In

reality units are just sort of a
construct that we use. It's not

actually in any of the LLCs laws
that they are actually units. It

always is a percentage because
really, most of the time these

are operating behind the scenes
as partnerships. So it's really

driven by percentages, but units
is about Very convenient way to

refer to it. So I almost always
refer to everything in units.

Because at the end of the day,
it's easier to calculate. Well,

where exactly is what exactly is
that percentage rather than

having to deal with the math of
calculating varying percentages,

if there is, if you own point
37215 of an investment, but that

investment was going to raise
$20 million. And now it's, and

now through optimization, you
were able to raise 19 million,

and you bought back $500,000
worth of units? Oh, my God, how

do you figure it out? It's much
easier to just say, Okay, well,

those units got decreased here.
So then my denominator changes,

and I can still figure out very
quickly, what my, what my actual

percentage of ownership is. So
that's, that's one of the very

key things, how much are those
units selling for? How much?

What's the minimum investment?
What What kind of

considerations? Are there for
minimum investment? Does it have

to be that? If I make an
investment? Are you able to use

the funds immediately? Or do you
need to wait a period of time?

Is that money getting set put
into an escrow account? Or is it

is it going into the LLC bank
account, those are the kinds of

things that I want to know as an
investor, and they should need

to be in your PPM number five,
and six, I'm going to do

together. And that is your
company background and the

management profiles background.
Remember what I said earlier,

that people are investors are
ultimately making an investment

in you, they're making a
decision based on whether or not

to trust you, and at the end of
the day, give you money in

exchange for this hope of making
more money. So the background of

the company, and the background
of you, as a manager are

critically important. Everybody
needs to know who they're

investing into. If it was blank,
nobody would invest. If they had

no idea that was going to
happen, it's just not going to

happen. It's one of the major
hurdles that exists when you're

marketing a security under 506.
C, and you put it on the

internet and are trying to get
investors because investors

still need to know they need to
feel who that invest, oh, that

sponsor it, they need to know
who's behind the curtain because

nobody just throws money at a
blank wall, hoping that it's

going to be happen. It's you're
just not going to collect

anything. So that somehow you
need to overcome that hurdle.

This is part of that. It also
sets up as part of a private

placement memorandum separate
from a brochure it's separated

puts you forward to give a
reasonable basis for why

somebody would make that
investment in the first place.

If you're a super experienced
real estate professional, for

example, then by putting that
sort of detail into your private

placement memorandum, if
somebody is reading the private

placement memorandum, it's like,
okay, I can see why somebody

who's reasonable would invest in
this. If you've if your private

placement memorandum for
building a 20 foot story, high

rise, what says, Well, you went
to clown school and dropped got

kicked out. And that's it,
there's probably not a

reasonable basis in order to
invest. So that automatically

weakens the entire structure. So
setting up a good foundation of

that background is necessary as
part of the PPM. Now what about

the situation where you just
don't have it? That's okay, too.

But we need to kind of make it
kind of clear, right, we need to

make it so that there's nothing
will being lied to. There's

nothing hidden about that. So
maybe you went to college and

you graduated top of your class.
Great, that's perfect for there.

Maybe it's you know, you've led
a team in a similar type of

setup, but it wasn't
specifically about whatever this

is, okay, well, that still needs
to be there so that we can come

up with a rational reason, in
order for this to happen.

Remember, investors invest in
you, but they do it on an

emotional level. But at the end
of the day, they need a rational

reason to prop it up. They need
to justify it rationally. And

this is part of that
justification. It's a part of

the justification to if
something goes wrong, and

somebody is looking at the
details of the investment. If

that kind of rational
explanation isn't there, there's

a big problem. Also very
important is our seventh topic.

And that is financial
statements. Financial Statements

basically give the money
situation that It exists. Now,

most of the time, my clients
don't actually there is no

financial statements. This is a
brand new entity. Oh, that's a

risk, we need to put that there.
There's no financial statements.

There's no background, there's
no history on this entity to

give financial statements for.
We put that in a risk statement.

But here we're talking about the
financial disposition of our

company. What is the basis for?
What's the source of funds look

like? Is it primarily through
this offering? Is it all through

this offer? Is there a third
party lender, what's the metrics

that are being used in order for
a third party lender to have cuz

that lender, if I go to a bank
and get a bank loan, the bank

has priority over all of my
investors, your bar, your your

investors need to know that what
position that they're in, so

they can kind of make good
estimation of it. It's why your

preferred equity people need to
understand the business as well,

because they actually have
priority over those common

investors, but they need to know
who's over them. They need to

understand that as well. Is
there going to be co investment

from you as the sponsor? Are you
going to be putting money in as

well? If you are fantastic. If
you're not, if your investors

would like to know that? I
wouldn't necessarily say call it

out if you're not putting money.
But if you get the question, you

certainly should tell them. If
you if you are, you definitely

should tell them because
investors are almost always

going to ask how much skin in
the game are you putting in? So

this is another place where you
can put that? What are the costs

of the asset? You know, are you
buying that one acre of land for

$50? billion?

That seems suspicious? Or are
you buying that one acre of land

for $10? Wow, what a great deal.
Right? So what is the what are

those expenses that are being
associated with it? If there's a

development activity? What kind
of development costs? Are there

hard, hard and soft costs? What
does the operating expenses look

like that I as an investor
ultimately paying for by giving

you this money? What are
management fees? You know, it

might, if I make this investment
today, and say we're buying a

piece of real estate? Are you
immediately taking an

acquisition fee? I kinda would
like to know, if you're getting

your pocket, getting money in
your pocket right away. It's

probably not a problem. But I
need to know that that's what's

going on. Lastly, what kind of
reserves are you planning and

now reserves to me, you know, as
an investor that signals you

know what you're doing? Because
if you have $0, in reserves,

something's wrong. You know,
what kind of budget is that?

Where there's no, there's no
safety net whatsoever? It's not

very safe, I would be thinking
you're probably going to be

making a capital call within a
month. So what is the reserves

look like? And what's your plan
on reserves? How's that gonna

work? That's the talk about
financial statements that needs

to be in your private placement
memorandum. The eighth topic,

our legal considerations, now,
probably you're doing this under

Regulation D, it covers 98% of
all of the funds that are got

are gathered in the private
investment world go under

Regulation D. So it's probably a
Regulation D rule. But what kind

of entities are using? It's a
different thing, whether it's an

LLC versus a corporation. Is it
a partnership? That would be

strange? Is it a limited
partnership that's important to

now? Because that certainly
changes the game and how I think

about an investment. What, what
rule under Regulation D, are you

going under? Are you going under
Rule 506? B so that you accept

non accredited investors? Are
you going over under regulation?

Five, rule 506 C, that allows
for only accredited investors, I

have to go through a
verification process. Those are

things that need to be
discussed. What is that criteria

that you're using for accredited
non accredited investors? What

have you decided you need to do
in order to verify accredited

investors? If you're going under
Rule 506? See, if their

confidentiality in this, that's
an important legal consideration

as well. You know, how open is
Am I allowed to be? Can I tell

everybody about this investment?
Or there's certain things you're

disclosing to me that need to be
kept secret? What about

international investors,
international investors can

invest, but are they being
allowed to invest? What are the

rules that you're using in order
to allow those international

investors to invest? And of
course that restriction on

transferability is also a major
legal consideration. The ninth

major topic and this really kind
of is Oh critical because it's

kind of the whole purpose behind
the PBM to begin with, and that

is investor suitability an
investor needs to be able to

make that determine that
determination that your

investment is suitable for their
own needs, they need to be able

to figure out is the amount of
risks that you're that you're

that you have inherent in your
investment, is that suitable to

me is a super high risk, but I
need something very low risk, or

is this something extremely low
risk? And it's just not going to

give me the kind of returns? So
is this suitable? Does it serve

my needs? Are you a cash flow
deal? But all I want as

appreciation? Or are you an
appreciation deal, and I just

got, I'm going to be living off
this money. This is cash flow, I

mean, to make those kinds of
things, what kind of expertise

exists in it? So if you're
buying just real estate, how

much do I know as real estate?
Is it really something I want to

get involved in? Is it something
I want to invest in? So when I'm

looking at your, your strategy
and your tactics, I can

understand them, because if I
don't maybe is isn't the right

kind of investment, right, you
get all sorts of investors who

know that I'm just not going to
go into it, because I just don't

understand it. I mean, Warren
Buffett himself didn't go into

tech stocks for a very, very,
very long time, because they

said he just didn't understand
it. Now, he is invested in a

number of tech stocks, but for a
very long time, he didn't do

any, just because he didn't
understand that market. And

that's a sensible reason. It
just wasn't suitable for him. So

that those kinds of decisions
are necessary for the your

investors to make, and that's
the suitability analysis that

they need to go through. You at
the same time have also somewhat

of a burden in order to
understand their, their own suit

the investor suitability, if you
know that the investor is a cash

flow dependent person, they need
that cash flow, but your deal is

not going to cash flow for 10
years, you need to make sure

that they really understand that
your deal is not cash flowing,

it may not be suitable for them.
It would not be right to put

them in the position of buying
into your security and not

making and, and just not telling
them not making sure that they

understood that. So this idea of
suitability is critical. And the

last thing that's often in a
private placement memorandum is

the process. So what do you need
to do to invest? I've read

through your ppm. I understand I
am ready to give you my $200,000

today, what do I need to do?
That's oftentimes part of your

PPM as well. Typically, the
process is after you've read the

PPM and have the opportunity to
ask questions of the sponsor,

then you will sign a
subscription agreement, you will

fill out an investor
questionnaire, if you need to

get accredited, get a third
party that say you're an

accredited investor, you'll do
that you give those to the

sponsor. The sponsor looks at
them says great, we're what

happy to have you aboard. Now
you wire the money to the

sponsor, and then you
countersign the subscription

agreement that's most often the
the order of events. But it may

be totally different. Maybe you
have some other thing, maybe

they need to register on a
website or a portal or something

like that. So this is the place
where you would describe that.

Wow. So there is our big deep
dive into private placement

memorandums. So I hope that you
have found this video helpful.

Now, me i My name is Tilden
Moschetti. I am a syndication

attorney with the Moschetti
syndication Law Group. What do

we do? Well, we write PPM s. We
also put together operating

agreements, subscription
agreements, questionnaires, file

Form DS, notify states,
everything that's needed in

order for you to start a
syndication, put together an

investment fund, a real estate
fund, or raise capital for your

business. This is what we do
every day. This is all we do

every day is specialize in
Regulation D. If we can be of

service to you. I'd be happy to
talk with you and see if there's

a good fit. Give us a call and
we'll schedule an appointment