Wealth Opportunities in Commercial Real Estate: Management, Financing, and Marketing of Investment Properties

Securities Issues

Any type of arrangement wherein one party is relying on the skill and effort of another party to generate a return on capital invested may be considered a security under federal and state laws. The result is that the syndicator must make the proper disclosures, or the transaction must fall within an exemption, or the active partner runs the risk that he will, in essence, become a guarantor of the investor's investment.

Licensing

The general rule is that if you are putting together a real estate venture and not receiving compensation for the sale of the applicable units, then no license is required. In contrast, in California, if you are getting paid to raise money for a LLC or a LP, then licensing is required and the type of license depends on the number of investors involved. If there are fewer than one hundred investors, you need a real-estate broker's license, which is issued by the Department of Real Estate. If there are more than a hundred investors, a broker-dealer license issued by the Department of Corporations is mandated. Even if there are more than a hundred investors, a limited broker-dealer's license may be available provided your activity is confined only to the sale of interests in entities that concern real estate projects.

Federal and State Laws

Securities offerings must comply with both federal and state laws. Federal security law is governed by the Securities Act of 1933. Each state has its own securities laws, which are often referred to as ...