If you’re in the note industry, think of yourself as a rock star and you are building a career path. Jillian Sidoti looks at crowdfunding your note deals like building a band and the first thing you do is write your songs, you need to have a plan for finding and closing deals and the only way to do that is if you know what your niche is. Then you build the band, you build your team of CPAs, bookkeepers, investment managers, marketing and technology. Jillian also shares you are the only one who will develop your rockstar image. If you know that an offer is good, and there’s one investor who thinks otherwise, don’t let him get to you and keep your consistency and clear message.

Listen to the podcast here:

Crowdfunding Your Note Deals with Jillian Sidoti, Esq

Our guest is Jillian Sidoti. We are happy to have her with us. She is our crowdfunding expert. She is the authority on all things, raising capital and crowdfunding. She’s going to talk to us about crowdfunding your note business to the next level.

The first thing you do is you need to write your songs, which I consider your business plans. What do you have to do? First, you have to find your niche and what everybody here assumingly is their niche is the buying the notes, not buying the properties, not buying mutual funds or stocks, but buying notes. You want to talk about that and then perhaps you even want to get more granular in the sense that you want to talk about I buy seconds but find a performing first or I only buy defaulted first and then I attempt to foreclose and rehab the property. Whatever your niche is, that’s what you want to get flushed out because oftentimes, I see people who come to me and go, “I want to raise capital for a million different things.” It’s completely unfocused and it confuses the investors and then it’s like yelling squirrel. We don’t do that.

Then the next thing we want to do is bullet point the plan. You guys are all entrepreneurs and if I told you to go out and write a big huge business plan, it would never happen. The way you start this is by bullet pointing the plan. We’re going to do step one, step two, step three, step four. How do you know what those steps are? Let’s take it out of the steps for a second and talk about the where, when, why, how, how much, and how much money you need. It’s like what a reporter would ask and just answer those questions. If you can write the who, what, where, when, why, and how much, that will put you in the right direction. All you have to do is bullet point that. The third thing you might want to do is perhaps find a partner so you’re not doing this alone. Stephanie, I ask you who was the greatest song writing partnership of all time?

I’m trying to think of one that was more of an equal partnership. I would say Martin Gordon and Dave Gahan but Martin Gordon was more of the songwriting. Who would you say? You’re not going back to the Rolling Stones?

It’s John Lennon and McCartney. Nobody wrote more incredible song. What’s the next thing you need to do? You need to get the band together. Get a team. Who is your team? I have CPA up there first because your CPA is going to be vitally important to your organization. At the end of the year, you have to do some tax reporting and your CPA is going to assist with that. You need to have a solid CPA that can assist with that endeavor. That CPA is going to be supported by a bookkeeper and maybe that’s you or maybe that’s somebody else in the organization. You do need to have someone who’s keeping track of this, so your CPA is not running to the end of the line at the end. You know what investors hate? They hate getting their tax forms late because that screws up their tax return and screws up their appointment with their CPAs. Don’t do that to them.

The other thing you’re going to need is an attorney. If you’re going to go out and start raising gobs of capital, you need a lawyer to help you get the proper disclosures out to your investors. The question I always get is, “I’m only dealing with a few investors and they’re all accredited. Those accredited investors are very sophisticated and understand what’s going on. Do I really need to have an attorney to tell them what’s going on?”Those sophisticated, accredited investors are going to be the first ones to sue you on the basis of fraud because you didn’t tell them exactly what could happen if things went wrong. You want an attorney to help you write those risks and write those disclaimers and disclosures for your investors. Then somebody who’s in charge of investment management and investment management should be somebody who wants to talk to the investors on a regular basis. If you’re busy running the business, that perhaps might not be you. If it is going to be you, then you need to train your investors to understand when, where, how, and how often they’re going to hear from you. They might hear from you on a webinar quarterly or they might hear from you via a newsletter monthly or whatever it might be. You want to lay that out front and tell them exactly what you’re going to do and who was going to do it.

Then what’s the next thing? Marketing person, you can’t raise a whole lot of money if you don’t have a whole lot of marketing. This can take different types of forms. I’m not talking about general solicitation going on in Facebook and saying, “Who wants to give me money?” As we’ll find out in some circumstances, going out and yelling from the top of your lungs on social media and in real estate investment clubs, it’s not exactly legal to go out and start screaming, “Who wants to invest with me?” You have to do some marketing whether that’s through building trust or something else.

Also, you want to have somebody who was in charge of your technology. Half of these roles might be taken on by you, but these are things that you want to consider when you’re doing it. I liken it to Eddie Van Halen when he used to play piano and guitar on the same song or something like that or the singer who also plays guitar. You might have more than one role. You might be a one man band. I definitely recommend it if nothing else, you have that CPA helping you out at the end of the year. All of these things are things you want to consider. You want to consider how you’re going to handle all this stuff. How are you going to manage your notes and how are you going to manage the reporting to your investors about what’s going on with those notes? That’s a big part of the technology as well.

Then the next thing you want to do is develop your rockstar image. I took a phone call from a brand-new note investor at around 5:00 PM. He came from Scott and the very last question he asked me was, “How hard is it to raise money?” I laughed and said, “It’s not easy, but if you aren’t consistent with your clear marketing message, then you’ll never raise any money.” I have this same conversation that I have with people who I’ve worked with in the music industry. It’s no different. Raising money and becoming a rock star are almost exactly the same. I have this experience because my husband, we were on that path and he continues to work with people who are on that path of trying to make it in the music industry. It is no different than raising money and here’s why. These kids or musicians who get the door slammed in their face all the time have to know that those ‘noes’ are one step closer to the ‘yes’. It’s the same with raising capital. The ‘noes’ you’re receiving are getting you closer to a ‘yes’.

There’s a third element to this, that consistency will rule the day. Just because somebody tells you they don’t like your deal, if you may analyze the deal and you know the deal’s a good deal and you know the offer is a good offer, don’t let that one investor bring you down and ruin your consistent message. Also, you need to have a clear message. My experience is when investors come and give investors way too many choices, the investor doesn’t choose at all or they start trying to take advantage and you need to be in control at all times. You have to be in control of the message. You have to be in control of your image and what you’re offering and not let the investor get in the way of that. Oftentimes, we hear stories in the music industry about how somebody who didn’t have control over their career, they didn’t have control over their finances. Somebody else was managing their image and it didn’t necessarily work out for them. You need to have control over that. That doesn’t mean you don’t take advice from good sources. If Scott Carson is telling you, “That’s not a good deal. That’s not going to fly,” you might want to take that into consideration. If you have investors who are either greedy and don’t know what’s going on, that’s not necessarily true.

What do I mean by making an offer that doesn’t give an investor too many choices? You have to set the stage. You’re making the offer. They are not making the offer to you. The question is and to the investor, “What is it you want to make?” A rock band doesn’t ask what kind of songs you want to hear. They write the songs they want to write and you’re going to make the offers you want to make. What is that offer you want to make? The offer you want to make is someone that’s going to make you the money you need. Oftentimes, what I find is that entrepreneurs who are going out and raising capital make the mistake of worrying about what it is that their investors need instead of worrying about what they need.

Why is it so important? It’s important because if you’re not getting what you need as an entrepreneur, then you are not going to work hard or maybe you will work hard and you’ll be miserable. Either way is not good. You need to work backwards. What you have to start with is how much money is the deal going to make? That’s number one. How much money do I need in order to make this worthwhile? That’s number two. If the difference between those two numbers is negative, then the deal’s no good. If there’s a small margin between those two numbers, then the deal’s no good. Then if there’s an adequate margin between those two deals, the next step is contingency for things that are going to go wrong. The difference between those two numbers is going to be what you offer your investors.

The last number we come up with, not the first, is the offer we’re going to make to investors. We make that offer and we have a consistent and clear marketing message on who we are and what it is we do. That doesn’t necessarily mean our returns are 8%, but rather we are experts in the fields of buying notes in non-judicial foreclosure states. We go in and we foreclose and we rehab the property. I could repeat that over and over again until somebody got the point. If you want to take it out of the domain of rockstars and raising money, think about it in the terms of a company that you admire, Amazon, Apple, Google or American Express. I’ll even say McDonald’s. Maybe they don’t have the greatest reputation in the last couple of years, but they have the same consistent marketing message. If you hear a jingle from McDonald’s, you remember that because they beat it into your head over and over again. Who forgets ‘I’m Lovin’ It’ or ‘Good times, great taste at McDonald’s?’That’s two examples of McDonald’s jingles that were repeated over and over again.

Then the next thing you want to do is go out and start getting gigs. Where are you going to deliver that marketing message? Where are you going to deliver what you’re talking about with investors? You’re going to share your knowledge and that is the biggest way you will raise money is if you share your knowledge. What I want you to do after this webinar is over and before the next one, if you have time, is just put a little message out on what you learned here. That’s going to establish you as somebody who knows more than everybody else. That’s going to establish you as that expert. A lot of times, the people who are on stage who are rock stars are somebody who knows how to play the guitar just a little better than you do in your bedroom. That’s what we’re looking for.

You want to go out and share that knowledge and you want to continue to share your knowledge. No one is going to steal your great ideas. I could stay here for five days straight and talk about all the areas of law, talk about everything I’ve learned in the last fifteen years as a practicing securities attorney. That does not mean you’re going to stop what you’re doing, go to law school, take the bar exam and then open a competing securities law firm. You’re not going to do it. I could do it until I was blue in the face. I encourage you to do until you’re blue in the face because that’s what’s going to start building your credibility. That’s going to be your clear and consistent marketing message that you know something somebody else doesn’t. You have an opportunity that somebody else doesn’t.

The other thing you can look for are marketing companies. You can start buying social media ads or Google AdWords. You can have success if you have the right targeted message on Facebook. You want to engage in social media. What do I mean by this? If you belong to any real estate groups on Facebook or perhaps you belong to some real estate message boards on LinkedIn or some other real estate-related social media outlets, what you should be doing is if somebody asks a question and you know the answer, you should answer that question. I do it all the time for my own business. You should be doing it for yours.

People will start making connections that you are the person to go to for note investing opportunities. Then find media outlets. Journalists and alike are always looking for people to interview and for soundbites. Look for those opportunities. Another place to go and look out for are people who need content for their podcasts. They’re out there. I get requests all the time to speak on podcasts because people need material and provide that material. Get yourself a little media kit together and provide that material. We see this guy playing in his front yard or whatever, and you thank my one band for coming out tonight. Someday, you could turn into the Rolling Stones and it would turn out like this. This is where we got to move up to that. Get out of your front yard. I’m playing for that one fan and move into playing for a bunch of people. If you listen to any rock star out there, they talk about how they played in bars to the bartender and now they’re playing stadiums. It’s no different for you with raising private money.

The next thing you want to do is record your album. Get your stuff together. You’ve got your plan. We’re taking a very step-by-step approach to getting this done. We’re getting our plan together, get our new team together. We’re getting our marketing together. Now, we’ve got our consistent and clear marketing message. We’re ready to get our documents together. What does that mean? We’re going to get a private placement memorandum, an operating bylaw, or I have staff down there, but we’re not going to be using staffs here. Perhaps you have a note. We’re going to have a subscription agreement and we’re going to file our Form Ds. This is the one scary slide I have. Like, “Jillian, what is all this stuff? I don’t have any of this stuff?” You do. If you’re raising any kind of capital, the PPM is what provides that disclosure and those risks to the investor. You need that story so that they understand exactly what they’re getting into.

People often say, “I have this conversation yesterday too. Why would I spend all this money on a private placement memorandum when my investors, they know me, and I don’t need to do this?” I hear it. I don’t want to spend money on doctors. My son said he was sick a couple weeks ago and so I took them to the doctor and there was nothing wrong with him and I was mad. I paid $50. I get it. I totally get it. None of us want to do it but you got to do it. Let me tell you something else. Not only is this the best insurance policy you’re going to buy, but it’s going to help you raise more capital because people are going to see that you’re taking it seriously and that you care enough to make these kinds of disclosures. I want to encourage you to take these steps and do it the right way the first time. Even if it costs you some money in legal fees, even if it costs you some investors because they look at it and go, “No way,” this is a great barrier to entry and to find out who is an investor I should not be taking money from. Those people who shy away from those risk factors are not good investors in the first place. We want to avoid them.

We have our operating agreement. The operating agreement tells us, “This is how the company is going to run.” Maybe instead of an operating agreement, you have a JV agreement or something to the effect. I know a lot of you guys are doing JVs. JVs are great, but it doesn’t get you out to securities law and I don’t have a slide on this. I’m going to tell you a way to get some free information on how to get test for this. I’m going to tell you what the test is. You’re selling securities. If there’s money, there is an investment of money. There is more than one investor. The investors have an expectation of profits and you’re doing all the work. Oftentimes, I see people put these JV agreements together saying like, “Securities laws don’t apply to me because I’m doing a JV. I’m not selling stocks or bonds or mutual funds. I’m not telling any of that. I’m not selling notes. I’m entering into a JV with this guy and he’s the money partner and I’m the work partner.” It doesn’t work that way.

If your partner is a passive partner and you’re the one who’s doing all the work and you have more than one of those JV agreements floating around, then the Securities Exchange Commission and the State Securities Boards will say that you have more than one investor. They’re all expecting profits and you’re the promoter. You will pass the test. What is your obligation if you pass the test? Providing proper disclosure. It’s comes down to that. Just providing proper disclosure. What’s going to happen? You start that proper disclosure with the who, what, where, when, why, and how much. Just keep that in mind. Then I have subscription agreement. That’s the agreement between you and the investor that says you and the investor, “This is what we’re agreeing to and I’m an investor who understands the risks associated with investing.”

What’s the next thing you want to do? In some circumstances, you might have to do something called filing a Form D. Filing a Form D means that you’re telling the State Securities Boards and the Securities and Exchange Commission that you’re using an exemption from registering the securities. Let’s talk about more of the functionality because the reality is that you should know the law on a cursory level. At the end of the day, what you should be doing is going out and hiring an attorney to assist you with this because it is a big body of the law and it’s hard to navigate through. I want to encourage you and you don’t have to hire me. I would love it if you would, but you don’t have to. We have plenty of free stuff. If you want to do your own legal analysis and research, you can check out our website. We have plenty of free information there. You’ll get a treasure trove. I’m going to tell you how to get some free stuff. The next thing you want to do is go on tour and start raising money. Consistency is key. Organization is key, and confidence is key. You can’t put up two Facebook posts and expect that everybody in there is going to start investing with you and get the message right away.

When I was in college, I took this marketing class and I loved it. It totally taught me about how the psychology works, why advertisers advertise the way they do, and what needs to be done. One of the key points I took away from that class was that somebody has to hear a message seven times before it even registers, before it even is a thought to the potential consumer. Think about that. That was like two or three years ago. Now, it’s nine times a person has to hear a message before it registers, before they even understand the message. You can’t put two Facebook posts up and expect the money to be rolling in. You are asking people to trust you with their money. You’re asking them to give you money and they might not get anything back in return for quite some time. They’re not getting a product, they’re not getting a service, they’re investing their capital. They need to be able to trust you and they have to have that consistency.

Organization is key. Confidence is key. If you’re not confident, no one’s going to trust you because you’re not confident in yourself. How can you expect to build confidence? You want to have a great appearance. I’m not talking about physical appearance, but you need to have a good marketing presence and a good legal presence. Otherwise, people aren’t going to buy it. If you provide people with legal documents that are short and shabby, that is not going to build confidence in the investor. I’m not saying it has to be super long and hard to read. As a matter of fact, one of the things we try to pride ourselves on is making documents that are easy to read for the investor so that they don’t have to run to seventeen attorneys to figure out what it says. You do need to have adequate disclosure.

A question I always get is, “Can I find investors on Facebook?” The answer is, sort of. What do I mean? Let’s take a look at what an accredited investor is first. An accredited investor is someone who makes $200,000 a year as an individual, $300,000 a year as a married couple or has a net worth of $1 million exclusive of their primary residence. Those are our highest and best investor. We can advertise to them all day long. We can advertise to anybody but only under the506(c) Regulation A and Regulation CF. I’m going to focus on 506(c). 506(c) says if you take money from only accredited investors and you verify that they’re accredited, then you can use means of general solicitation. You can advertise on Facebook. You can go out and say, “I’m offering 8% preferred return on a note investments, call me.”You can do that under 506(c), but a lot of us have friends and family that are not accredited and they’re very good investors.

What do we do if we can’t take accredited investors? We have to take other types of investors, sophisticated perhaps, or maybe in some cases, unaccredited investors. We have to figure out what our message is. So what is your message? “I invest in what I do. I provide this to communities.” What is your message? I invest in what? I do this? I provide this to communities. Don’t look to other real estate entrepreneurs, but also look to some other companies that you admire. What is their message? I use Apple all the time because their marketing is amazing, but I’m not a huge Apple fan. They were great at marketing and here’s why. Steve Jobs never came out and said, “Our stocks are $75 now, but I’m coming out with this new product and it’s going to go up to $300, so you might want to buy stock now.” Instead, what he would do is he would go, “Come to the shareholders meeting because I’m going to show you something totally fabulous.” People would draw their own conclusions. “It’s an iPod. No one’s ever created an iPod before. We better buy stock now and then stock would go up.” You want to come up with the same design around your business. Then you design the message. All this is good unless you deliver the message. Then figure out how you’re going to deliver the message.

I keep mentioning Facebook because I’m a huge Facebook fan despite what Cambridge Analytica and all that other stuff. You have to figure out how you’re going to deliver the message. I have one client down in Florida who is in the note business. He has a $50 million note business fund and he does it all through luncheons. He invites people to a luncheon and he provides them paper copies of his documents. That’s how he does it. That’s how he’s delivering his message, not anywhere on the internet. You have to figure out how you’re going to deliver your message and what you’re going to do and how you’re going to say it. Be consistent and constant with the message. Doing it once, doing it twice, doing it three times isn’t going to cut it. You got to do it more than that and you got to be consistent.

I didn’t talk a lot about the law because I wanted to give you something that you could go out and start using right now. It gives you some real action steps here. Let’s talk about the law. How can I find out more information about the law? I’ve got this helpful chart. I want to be very clear. I want you to send me an email with the subject line ‘Helpful Chart’ to Jillian@CrowdfundingLawyers.net. What’s going to happen is you’re going to get an email response. This chart will be sent to you in full. What I’m also going to send to you is an article on the difference on 506(b),which is the law most of you are going to fall under and Rule 506(c),which is also listed here as The Accredited Investor General Solicitation Law. The other thing you’re going to get in the email are a bunch of links. This is totally free. I’m not going to spam you or anything like that. It’s a great way to get out information and get the narrowly-tailored information that you need in order to get started.

What’s the final thing you need to do to be a private money rock star? You have to take care of your fans. If you get a bunch of investors and then ignore them, that is no good. You want to report to them regularly, be timely, give them reasons to invest with you again. Your best investors are the ones that have already invested with you, just like my best clients are the ones who’ve already invested with me as a client. I have multiple repeat clients and I try my best to take care of them as opposed to trying to go out and always get new clients. As a matter of fact, I’ve had a real problem where I don’t follow up with the new potential clients as much as I do with my existing clients.

That’s cost me clients. It’s unfortunate, but my current clients are more important than the clients I don’t have already. I want you to keep that in mind. The investors you have that are good investors and have treated you well and had trusted are far superior to those potential investors. Make sure you take care of them. I’m telling you about one of my own faults. What I failed to do in recent history is follow-up with potential leads and that’s costs me business. I’m not super okay with that, but if it was at the expense of my current clients that I nurtured these new relationships, that wouldn’t be good either. That would be way worse. That’s why I’m okay with it.

I wrote this book, it’s on Amazon, called The Crowdfunding Myth. I have a course called The Crowdfunding Myth Home Study Course and it’s really good. It’s got six courses in it. It’s got PDF explanations. It has some videos. It not only tells you all the rules associated with investing, but it also tells you the different ways that you can structure your whole entire deal and gives you ideas on how to structure your deal for investors. It gives you spreadsheets to work that out. I also give you the law, complete and unfettered. I have this great chapter on where to find investors, all that other good stuff.

The reason why I want you to buy now as opposed to figuring it out later is because if you buy this Crowdfunding Myth Home Study Course, you’re going to be grandfathered into the Private Money Rockstar Home Study Course, which is coming out along with our new book How to be a Private Money Rockstar. I’m super excited about this. We’ve been working on it for a super long time and it’s going to have all new materials. If you buy The Crowdfunding Myth Home Study Course, then you will be grandfathered into that brand new course. It’s like a two for one deal. Also, Private Money Rockstar is going to be priced much higher than The Crowdfunding Myth. It’s a bargain.

Everybody always asks, “I don’t have enough money. How do I raise money and how do I raise money legally?”

Everything is in there. I’m coming out with some new material and I’m going to have some expert interviews in there, which is different from The Crowdfunding Myth Home Study Course. We sell it online for $1,497. I always offer it here for $997 and then Scott gives an additional Note CAMP discount. I want to encourage you to do that. We’re going to have some exclusive content that you can’t get anywhere else in the Private Money Rockstar Home Study Course. What you will get immediately if you sign up now is The Crowdfunding Myth Home Study Course, which has six books in it. Six separate books on how to start your whole money raising excursion and how to structure your deals. It has a bunch of spreadsheets. It has a bunch of marketing examples that you can use. Any examples are either in Excel or Word, so you can literally take them and use them. You don’t even have to try to reverse PDF them or create them yourself. You could take them and use them if you wanted to. We’re also going to have an exclusive Private Money Rockstar Member only Facebook group where you can get direct access to me and ask me all your questions and things like that.

I do want to say this. I make money as a lawyer. I don’t make money selling home study courses. For those of you out there, the reason why I’m doing this is I’m trying to build a center in Africa for human trafficking children. I worked with a woman named Katie Magill, who’s in the center of it all, and she literally pulls children and women off of the street and tries to rehabilitate them and give them a life outside of human trafficking. It’s a massive problem worldwide. If you think it’s not in your own backyard, you’re crazy. The proceeds from this, I need about $60,000everyone.60 of you out there could purchase this. I’d be good to go, or maybe not quite, but I’ll be close. We would get that center and have the resources we need to get some more children and more women off the street and out of the human trafficking situations. We’re 501(c)(3), so it’s Project Purpose International. You can go to the IRS’ website and check out our 990 that we file every year we’re a legal deal.

We have a question.“What rule applies to the one-off note where I try to get a JV partner on a note?”

There is no rule because if you only have one investor, the securities laws don’t apply. If you start gathering more than one investor, even if it’s for separate notes, then you need to be mindful of the fact that you’re entering into securities waters. If you’re not sure my recommendation to you would be is to post your situation on one of our Facebook pages. Either CrowdfundingLawyers.net or the Crowdfunding Lawyers Facebook page or The Private Money Rockstar page and also go to Private Money Rockstar page because we’re building up a nice little cadre of already asked questions that you can also scroll through.

That’s a good compendium. Another question, “Can I generally solicit for one-on-one investor investment deals? Many deals or each one-to-one only?”

If you’re looking for anybody who’s not accredited or you’re taking any money from sophisticated investors, then you are ruining any exemptions you might have had. General solicitation is generally illegal generally speaking. I would encourage you to proceed with the utmost caution. I saw on Craigslist an advertisement, ‘Invest in real estate. Low risk, guaranteed safe and secure. 8%.’ Years ago, it happens almost daily where somebody posted a stupid ad like that on Craigslist. It’s bait because you know people who are advertising on Craigslist like that in that very desperate manner are not being legally compliant. There is no way.

The other issue I want to talk about certain types of general solicitation in reek of desperation, you will never raise any money if you’re desperate. Then you’ll also get caught by the Securities Exchange Commission and the State Securities Boards and they’ll make your life miserable even though you have no investors. I don’t care if soliciting you’re soliciting for one-on-one deals. Don’t do it. You’ll ruin any exemptions you might have had. I’m going to answer a bunch of questions. You are already grandfathered in. If you already purchased The Crowdfunding Myth Course from some other life, then grandfathered into The Private Money Rockstar. That is my promise to you.

Just send her an email and a reminder so she can add you in. Somebody wants to know if you’re on Instagram.

I am but mostly are pictures of foods. I have a personal Instagram. You’re welcome to check it out. It’s Jillian Sidoti. I’m not super active on there, but we have a firm one. It’s Crowdfunding Lawyers. Definitely go check that one out and it’s brand new. We’ll be more on top of that.

We have a question, “Can we contact you for one of the deals as we have investors for a deal?”

That’s why my contact information up there. I don’t want you to not contact me. I also don’t want to take your money if you’re not ready to scale. If you have like smaller stuff and you’re not ready to pay money to an attorney, I have the resources for you in both The Crowdfunding Myth Home Study Course and Private Money Rockstar are going to have a lot of self-help stuff in it as well. Contact me. If you have general questions with no intention of trying to put something together, I prefer you ask it on Private Money Rockstar, so everybody can benefit from your questions.

We have a question regarding a CPA and a bookkeeper. What do you recommend, Quicken QuickBooks, other?

QuickBooks. You need a CPA after you do your quick books with QuickBooks.

We have another question, “My ten-year-old daughter has an IRA and I, as her parent, control the IRA. Can I JV on someone else’s note deal with her IRA? It doesn’t have a lot of money in it yet.”

I don’t know about that. That’s a really good question and that’s really a CPA tax attorney question because I don’t know if you violate any rules by going into a deal with your daughter. That’s like an ERISA rule. That’s not a securities rule. I’m not going to answer that question.

You were in the presentation with Nathan from Quest IRA. That’s one of those questions that I would punt to them and go, “I’ve got this IRA and I’ve got this IRA and we’re looking at this asset, can we do this or no?” Just so that you’re safe and everybody’s on the right page, QuestIRA.com is the website and I’ve got Nathan’s email and stuff in Basecamp so you guys can reach out to them too. That’s a good question. Maybe you just answered this. Can you post the Facebook groups that you mentioned that we can ask questions in?

If you search for Private Money Rockstar or Crowdfunding Lawyers, you will find us on Facebook, but we’ll post it as well.

Can we advertise on social media for JV deals or no?

These are strange questions. I don’t mean they’re strange in the sense that they’re strange to ask them. They’re strange to answer because to say that is ignoring a whole bunch of other stuff. That’s why I really encourage you. I’m going to go back for a second. I want to encourage you all, every single one of you, even if you are I talked to you every day because I know there’s a couple of people on here that I have relationships with and maybe you have my book and maybe have the home study course and maybe you have all this stuff, you need to write me, Helpful Chart Jillian@CrowdfundingLawyers.net because that’s going to blast off to you all these little laws and all these little rules and this chart is going to be an incredibly invaluable to you.

When you say JV, I don’t know what that means on its face, and this is why. When you say, “I’m going to do JV with somebody,” I don’t know if that means that you’re looking for money from investors and you’re doing all the work, or if somebody is coming in with deals and you’re coming in with deals and you’re both JV-ing together and you’re both doing the equal amount of work, then none of this applies to you. That’s a totally different situation. I want you to be extremely mindful of that. There’s a huge difference between asking if somebody is going to help you out with running your business and just asking somebody for their money and you’re calling it a JV.

We have another question, “Does putting Facebook ads out about how to get on the preferred investor lists to get emails about JV opportunities?”

You have the word investor in there, so it implies right off the bat that you’re looking for investors. Can you do that? Yes. When it comes to the point of investment, do you only take in accredited investors? If the answer is no, then we have to go back and reevaluate what you’re really doing here with these Facebook ads. I don’t know the context of the situation. When you go out there and says, “Preferred investor lists,” are these investors buying the notes outright or are they doing something else? I look at it at the same way I look at the turnkey rental market. There are some term turnkey rental groups out there that say, “We’re going to buy this property, rehab the property and then sell it to you, but then we’re going to be managing the property and take some of the profits from that property and then the rest of the property is going to go do you, but you own the property.” A typical Turnkey rental. The question becomes, is the relationship between the seller and the buyer mandatory going forward according to the contract?

If it is, then I would argue that there’s a security there. If it’s not, then it’s just the sale of property. I don’t know if that difference is really clear because I’m kind of rushing through it, but that’s what we’re really looking at is that is there number one, investment in money? Number two, is there more than one investor? Number three, is that investor or those investors expecting some kind of return on their money? Four, is it through the efforts of a promoter? In other words, are you doing all the work? Are you providing the service? Are you the one in control? If you answered yes to all of those, then the rules we’re talking about here apply. If you answered no to even just one of those, then these rules do not apply. You can’t be artificial about it. You can’t be superficial about it. In other words, you can’t try and call one thing something and really be doing this thing over here. The government sees right through that. Just be mindful of that. You can always ask me questions. I completely encourage you to continue this conversation on Private Money Rockstars’ Facebook Page.

I have my 3D. Disclose, Disclaim and Details. That’s the 3Ds with providing documents, disclose, disclaim and details. You want to disclose all material facts, you want to disclaim any liabilities and you want to give the investor all the details. If you go to PrivateMoneyRockstar.com, we have a series of webinars coming up. They are all free. You want to definitely check those out. Those series of webinars that are coming up are not on replays and there are four of them left. The reason why they’re not on replays is because they’re free upfront and I take it away and I put it in Private Money Rockstars Home Study Course. You either come live or you don’t come at all or you buy the home study course. That’s how you get all of the webinars. If you missed any of the webinars, we already did two of them, we have four left, if you missed the previous two, you can get them through the Private Money Rockstar Home Study Course once that comes out and go to PrivateMoneyRockstar.com to sign up there for the remaining four free webinars. All different subjects about raising private capital.

As a new investor, do you recommend I do a few deals myself before starting to look for crowdfunding or as long as I disclose I am new?

Crowdfunding can have a couple of different meetings. I want to do some soul-searching first. The reality is if you want to get into some good deals, sometimes you’re not going to have enough money to do it yourself. You’re going to need somebody to help you out financially, perhaps. Who should help you out financially on your first couple of deals? Those people should be people who trust you and know you, not a crowd of strangers. Go to people you know. It’s the same analogy as the clients that I know are better than the clients I don’t know. That is the same with investors and your tribe.

What you want to do is really go out and see who you know already, who’s seen your circle of influence that you got to come in and invest with you. I do not subscribe to, if I’ve never done it before, I shouldn’t be using other people’s money. You can buy some cheap notes, I get that. Perhaps you have cash stored away for that purpose, but if you want to buy a $10 million apartment building, you are not doing that by yourself because if you’re doing that by yourself, you probably aren’t on this webinar. What you need to come down to is exactly that, disclose, disclaim and details. Disclosing that you’ve never done a deal like this before and you’re a novice. That, in itself, creates a certain level of risk.

Marketing for accredited investors is okay as long as you don’t promise returns?

You don’t even have to market for accredited investors. You can say, “Who wants to invest in my deal? I’m offering 8%.”When those investors invest, you need to verify that they’re accredited. That’s the point of time. Imagine if you could limit your advertising message to just accredited investors. We would all do that, but you can’t do that. That’s not even possible. Facebook doesn’t have a net worth or income key when it comes to demographics of advertising. It’s age, sex, location, interests, things like that. If you want to try to target accredited investors, I can certainly give you some words to use to do that. It doesn’t matter who you advertise to because if you put a billboard up on the side of the road, you’re not going to just have accredited investors only seeing that billboard. It comes down to the time when they call you and say, “I’m interested in investing,” and you say, “Here are my documents. By the way, are you accredited?” That’s when it matters. It doesn’t matter if an unaccredited investor sees your advertising. What matters is who you take the money from.

I can market with returns, just make sure to vet their credibility?

Whether they’re accredited at the point of investment. We have another question. What’s the difference between general solicitation and who wants to invest at 8%? There is no difference. That is general solicitation. Remember, if you’re looking at the chart on your screen, I have 506(c) up there. The article you’re going to receive when you get the Helpful Chart tells you the difference between 506(b) and 506(c). 506(b), no general solicitation allowed. Who wants to invest 8%? Not allowed. You can take 35 sophisticated investors and as many accredited investors as you want. On the other side of the equation, we have 506(c). This is where you can do general solicitation. You can say, “Who wants to invest 8%?”Only accredited investors can invest. Does that help?

What’s the likelihood of an SEC audit?

It’s a rare day that you’re going to get picked up by the Securities Exchange Commission. The Securities Exchange Commission is worried about people who are stealing gobs of money. Here’s the thing I want to say to you. We’re in for another downturn. It’s inevitable. It’s going to happen. All of you who are raising money illegally or improperly, whether you know it or not, are what the SEC considers to be low-hanging fruit. In the last downturn, many people who came to me after the fact, were low-hanging fruit. Do not be a low-hanging fruit and this is what I mean by it. In times of the good economy, the SEC takes some break, but when the economy gets bad, they always start to ramp up enforcement at that time to show that they’re being tough on fraud. You don’t want to be the low-hanging fruit. You don’t want to be that conviction. You want to be cautious with that.

I have a guy who lost all of his investor’s money, like every single penny, and he was turned upside down six ways to Sunday from every entity you could think of. FINRA, Securities and Exchange Commission, State Securities Board, every single one of them turned him upside down and shook him to see if anything would fall out of his pockets. The only thing that came out of his pockets were proper disclosure documents. They literally, one-by-one, would send him something saying, “We’re no longer investigating you. Our case is closed.”You don’t want to lose your investor’s money. Don’t get me wrong. That’s what you want to have happen in the event that you do. You don’t want to also have, “I lost all my investor’s money. I’m being fined $500,000 by the Securities and Exchange Commission and I can’t get out of it in bankruptcy.”

You can generally solicit and only sign up accredited, turning away the rest.

What do you want to do with the rest? Build in into this list. Keep those names on file in case someday you come up with an offering that can be provided to unaccredited investors. Don’t turn them away in a vicious manner. Say this opportunity isn’t right for you now, but in the future, if we have something, we’ll let you know.

It goes the same way with a lot of different deals that people are considering. Someone asked, “Do you go back to your seller and tell them it didn’t fit the wheelhouse?”When you go back to your investors, if they’re sitting around going, “We’ve got this money,” they’re on the right page. They want to invest. You may not have something that comes up to fit what they can do or would like to do for a little while. You can go by, “I’ve got your information. I know what you’re capable of. Here’s all the disclosures. We’re set. We’re good to go. When I get this I will let you know and you can reconsider or consider an opportunity at that point.”It works both ways. What about using the words funding and raising and marketing materials?

I don’t know what that means. Don’t use the words ‘low risk’, ‘guaranteed’, ‘safe’ or ‘secure’. Those are words not to use. Everything else, I got to look at it to know it. I’ll know it when I see it.

Do you need to have your 506(c) set up prior to any general solicitation?

No, you don’t. The question about the population is accredited, 3%.

That’s the great thing about the other funds is it opens up the playing field to so much more of the middle class and people that are wealthy, but they’re not being protested against.

Remember about sharing your knowledge, that’s not general solicitation. That’s building trust and credibility until people draw their own conclusions on what they can do with you and calling you and saying, “I noticed you write a lot about notes. Do you have any notes I can invest in?” That’s not general solicitation. That’s getting the other 97% of the population interested in your deal. If you have a huge swath of the 97% of the population that isn’t accredited that want to invest in your deals, then don’t be doing general solicitation. Share your knowledge and 77% of all foreign deeds filed since the JOBS Act passed, 506(b)offerings, which means the overwhelming majority of offerings are not using general solicitation at all. I’m pretty sure they’re relatively successful if that’s what we keep seeing the trend to be. You do not need general solicitation to be successful.

On that note, I’m going to close this down. Thank you.

You’re welcome.

Important Links

• Jillian Sidoti
• Jillian@CrowdfundingLawyers.net
• The Crowdfunding Myth
• Private Money Rockstar
• CrowdfundingLawyers.net
• Crowdfunding Lawyers Facebook
• The Private Money Rockstar
• Jillian Sidoti – Instagram
• QuestIRA.com
• PrivateMoneyRockstar.com

• Here’s How »

• WeCloseNotes.com
• Scott Carson Facebook
• Scott Carson Twitter
• Scott Carson LinkedIn
• We Close Notes YouTube
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• Scott Carson Instagram
• We Close Notes Pinterest

About Jillian Sidoti

 

Jillian Sidoti, Esq. is one of the country’s leading experts on Regulation A+. Since 2008, Jillian has submitted multiple Regulation A Offering Circulars to the Securities Exchange Commission for approval making her one of the few attorneys familiar with the law prior to the changes under the JOBS Act. Since the JOBS Act, Jillian has assisted multiple companies and entrepreneurs realize their fundraising goals through Crowdfunding, 506©, and Regulation A. She is a practiced speaker whose engagements are well attended and often come to produce sound bites and additional discourse. In Crowdfunding Myth, Jillian enumerates on the falsehoods that people tend to believe about crowdfunding and points prospective business owners in the right direction. Prior to her legal career, Jillian owned and operated a record label enabling her to tour worldwide with artists, including visiting South Africa, Canada, Europe, and the United States. Using that experience, Jillian has been commissioned to write articles and contracts for many music industry entities. For several years, Jillian taught Finance and Accounting for the BS and MBA programs at the University of Redlands, drawing on her experience as Financial Analyst, Controller, and CFO for many companies from manufacturing to real estate development. Jillian also taught a Small Business Management class where students are taught the anatomy of a business plan.

Jillian is currently a partner in the firm Trowbridge Sidoti – a securities boutique law firm with offices in southern California. They can be found on the web at CrowdfundingLawyers.net

Jillian has three amazing little boys Tyler, Tommy, and Nikola and an amazing husband, Derek.