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Standard Operating Procedure: Steps to Raise Capital for Equity Partnerships. MIND MAPS: Download the Free Software “ If you chase 2 rabbits you will catch neither”. My View of Real Estate “ Funding = Freedom” This is my Rabbit .

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standard operating procedure steps to raise capital for equity partnerships
Standard Operating Procedure:Steps to Raise Capital for Equity Partnerships


Download the Free Software

the pancreatic cancer case study 1467 sunny acres w none of my own cash or credit
The Pancreatic Cancer Case Study 1467 Sunny Acres w/ none of my own cash or credit
  • Purchase Price $53,500 One week Prior to my surgery
  • Improvements $21,000
  • Private Money $79,000
  • Cash Back at Closing $25,500
  • Acquisition fee $4,500 – I collected this up front
  • Sold $124,900 April 2012
  • Gross Profit $50,500
  • Net Profit $35,200 + 4,000 Acquisition Fee
    • (all completed while recovering from Pancreatic Cancer)

First Private Lender I Ever Got And I Had NO JOB, $15k Credit Card Debt and ZERO EXPERIENCE

  • Unsecured Note
      • 1st Note I ever did in Spring 2004 (non IRA)
          • 60k Loan / Note
            • 18% Interest / paid annually
              • 5 Yr. Note
      • 2nd note I ever did (IRA)
        • Interest Paid annually
          • $10,800 due in June every year
          • 90k
            • 10%
              • 5 Yr. Balloon
              • Unsecured
  • No Mortgage
      • No Security
what are your goals
What Are Your Goals?
  • Rehab, Fix & Sell
      • 3-4 Months
          • Buy, Fix & Sell
          • Buy, Less than 5-10k improvements, resell
      • 6+ Months (BIG Projects)
          • Buy, Fix & Sell
      • Here’s the Thinking
          • 30-60 Days
            • Big Improvements
          • 45 Days to Close
            • Once a Buyer is Under Contract
what are your goals1
What Are Your Goals?
  • Back to Back Closing?
  • Rental?
      • 3-5 Year Partnership
  • Tax Lien
      • 6 Month Redemption
      • 1-3 Years
          • Option 1=18-24%
            • Guaranteed
          • Option 2=I Get a House Free & Clear
disclaimer disclosure
Disclaimer / Disclosure
  • I am not an attorney….although I used to play one on T.V.
  • I am not a financial planner anymore….although I used to be from 1998 to 2005….
  • I am not an accountant and have NEVER EVER wanted to be….
  • Everything I say today is for informational purposes only

Q. What is a Private Money Partner?

A. Someone / Anyone who has cash who partners/ invests or loans to you / with you!

A. Assets Can Include Savings, Checking, CD’s, Brokerage Accts, Liquidated Mutual Funds, Stocks, Bonds, Retirement Accts, Health Savings Accts, Lines of Credit,


Q. Why Do Private Money Partners

Give Real Estate Investors Money To Do Deals?

A. Because The Investment Alternatives Suck and The Returns are Better in Real Estate….AND they like and trust you.

Let me explain……

500 000 mutual fund investment
$500,000 Mutual Fund Investment
  • American Funds = Small Cap World
  • Exp ratio = %1.09 (paid to the fund manager)
    • @ 10% = $50,000 Profit / ROI
    • @ 8.91% = $44,550 Profit / ROI
  • “A” Share Commission
    • (paid to the financial advisor who sells this mutual fund to their client)
    • $500,000 = 2% (breakpoint) = $10,000
  • $500,000 - $10,000 = $490,000 - $5,341 (%1.09 exp ratio) = $484,659 left (zero ROI)
  • $15,341 dollars in FEES for American Funds
  • $1,500 dollars in FEES for Equity Trust (self directed IRA)
share classes
Share Classes
  • Class “A” Shares – up front commission
  • Class “B” Shares – back end commission & higher expense ratio
  • Class “C” Shares – small annual commission & highest expense ratio
load no load
  • Load = Commission
  • No Load Fund = No Commissions
  • Paying a money manager = charge a money management fee
    • EX: Sell no load funds BUT charge 1% money management fee + 1% expense ratio
variable annuities
Variable Annuities
  • Act Very Similar A Mutual Fund
    • BUT
  • Access To 40 Funds Within The Annuity
  • Transfer From Fund To Fund With No Expense
  • 3% Commission Up Front
  • AND
  • 2% Exp Ratio Per Year Every Year
summary if you were a private investor with an old 401k where would you rather invest
SUMMARY: If you were a private investor with an OLD 401k, where would you rather invest?
  • OPTION “B” = US
  • We pay 12% minimum
  • ~OR~
  • 15% of profit
  • Whichever is greater?
  • Predictable
  • Control over investments that you can see and touch


  • CD = 1%
  • Annuities = 4% or less
  • Bonds = 4% or less
  • Stock Market past 5 yrs= 7.2%
  • Stock Market past 10 yrs = 6.71%
  • Significant Volatility
  • No Control over Investments
favorite source of funding for 40k flips
Favorite Source of Funding for $40k Flips?
  • A Self Directed IRA is an Individual Retirement Account where the owner funds real estate deals.
  • We get the funding for our $40k Flips from IRA’s.
  • Sample Investments
    • Note (I.O.U) w/ Mortgage
    • Fraction Deeds
    • Invest in Stock Companies BUT NOT S-corps


Mobile Homes

Mortgage Notes

Trust Deeds

Tax Liens

Lease Options

Precious Metals







Stocks & Bonds

Real Estate

Unsecured Notes




and more....



Real estate can create a life-long, tax-free income stream.

~ Real estate investing is one of the major attractions of Self-Directed IRA investing

~ Rental income is tax-deferred (distributions are never taxed if in a Roth IRA as long as the asset is held in your plan for at least five years

~ Keep in mind that you may never personally use the real estate while it is held in your plan. After age 59½, you may distribute the real estate to yourself penalty-free, and then occupy it



100% Cash – Property may be purchased with cash from an IRA. with your IRA with the IRA owning 100% of the property.

Partnering – An IRA may partner with another person, entity, or IRA.

~ Your IRA owns a percentage of the property

~ Can partner with personal funds (and/or disqualified persons)

Leverage – A (mortgage loan) to purchase property.

~ Must be a non-recourse loan

~ Typically for income producing properties with 35% to 40% down

~ Leveraged portion of the investment may be subject to UBIT (Unrelated Business Income Tax)

3 step process
3 Step Process
  • Set Up A IRA Acct = iPlan Group (Acct Application Form)
  • Fund The Acct = (Rollover / Transfer Form)
    • Rollover = from 401k or 203b
    • Transfer = from another IRA
  • Make An Investment (Direction of Investment Form)
    • Copies of Note and Mortgage
note and mortgage
Note and Mortgage
  • What is a Note?
      • I Owe You
          • Who is the Borrower
          • Who is the Lender
          • What is the Interest Rate
          • When is the Interest Due and Payable
            • Monthly
            • Quarterly
            • Annually
          • Payback
            • 1 Year / 3 Year / 5 Year
            • Amortized / Balloon??


      • Mortgages
          • Do have to be notarized
      • Notes
          • Do NOT have to be notarized
case study 3954 homestead rd ravenna oh
CASE STUDY 3954 Homestead Rd Ravenna, OH
  • Purchase Price $41,500
  • Private Money Partner Funding $79,000
    • Self Directed IRA
  • Cash Back at Closing $37,500
  • None Of My Own Cash or Credit
  • Actual Sold Price $121,000
  • Profit $44,000
  • Closing October 15th 2013
securities dealers
Securities Dealers?
  • We are not securities dealers!
  • What is and is not a security?
  • Q. If you are dealing with a security / what disclosures or documents do you have to file to be compliant?
  • A. Private Placement Memorandum
securities dealers federal rules
Securities DealersFederal Rules
  • Securities Act of 1933
  • Securities Act of 1934
    • Reg D
        • Rule 504
        • Rule 505
        • Rule 506
securities dealers state rules ohio blue sky laws
Securities Dealers State Rules Ohio“Blue Sky Laws”
  • Real Estate is NOT a Security (exempt)
  • Notes and Mortgages are NOT securities (exempt)
  • Tax Liens are NOT a Security (exempt)
  • Partnerships & Businesses & JV’s are NOT Securities (exempt)
what is is not a security
What Is & Is Not a Security
  • WHOLE Notes & Mortgages are NOT Securities
      • They are EXEMPT
  • Fractional Note IS a Security
      • I do not personally do these
      • *Anthony Geraci, Esq
three ways
Three Ways
  • Notes & Mortgage
      • 12% Int. or 15% of Profit
          • ~Whichever is greater~
      • I do not pay them anything monthly or quarterly
      • Investor gets paid when house sells ~OR~
          • Balloon Payment
              • 1 yr.
three ways1
Three Ways
  • Loans (notes) from Investors to Your LLC
  • Benefits
      • You own the property 100%
      • You make all the decisions
      • The Lender is “The Bank”
  • Disadvantages
      • You are REQUIRED to fulfill on the promise you made on the NOTE (I Owe You)
      • You Pay or They Foreclose!
three ways2
Three Ways
  • Fractional Deed for ownership
  • Join Venture Agreement for decision making
  • Benefits
      • No Lender Liability
          • They bring in the money and they are co-owners so they have the downside
three ways3
Three Ways
  • 50/50 Partner in the units of the LLC
      • Can split profits 80/20 or 70/30 or whatever you agree to
  • Benefits
      • No Lender Liability
      • They bring in the money and they are co-owners so they have the downside
raising money people that i have a prior existing relationship
Raising MoneyPeople that I have a prior existing relationship
  • Equity Partnership
      • Business
          • LLC
          • Partner On Deals
          • Chuck Finds the Deals
          • Jimmy Puts Up the Money
          • Joint Venture
          • Does NOT need Registered
raising money
Raising Money
  • Converting a Stranger to a Private Money partner?
  • What is a “Prior Existing Relationship?”
      • There is no True Definition BUT the Standard is “3 Touches & 30 Days”
          • Needed in order to make someone an offer
raising money from the public strangers or people we do not have a prior existing relationship
Raising MoneyFrom the public / strangers or people we do not have a prior existing relationship
  • Create a Prior Existing Relationship
      • “Education Based Selling” them thru the Cap Raise PPT
      • Teach about the market and options
      • Peal Back the Onion and remove their other options
      • Teach about my deals
      • Teach about sample deals / give them examples
      • WITHOUT making them an offer / asking to fund a deal
        • Exclusion Mentality:
          • “Do You Know Anyone Who May Be Interested In Learning More About This or Doing This With Me?”
raising money people that i have a prior existing relationship1
Raising MoneyPeople that I have a prior existing relationship
  • Start with this concept…..The “Equity Partnership”
      • Business
          • LLC
          • Partner On Deals
          • Chuck Finds the Deals
          • I Put Up the Money
          • Joint Venture
          • Does NOT need Registered
          • Must Advertise Partnerships / Joint Ventures / Stock in LLC
roi expected
ROI Expected
  • Rehab, Fix and Flip
      • 10-22%
          • 2 Points Up Front PLUS 1 Point per Month
          • 12% or 15% of Profit – Whichever is Greater
  • Back to Back Closing
      • 2 Pts.
      • $2500
      • Whichever is Greater
roi expected1
ROI Expected
  • Rental
      • 7-11%
      • Single Family
      • Monthly Payments
          • (must commit)
  • Tax Liens
      • 6-24 Months
          • 7-11%
roi expected2
ROI Expected
  • 30-90 Day Money
      • 22-25%
      • Toughest Money to Get
          • From a private money lender or a hard money lender
          • Too much hassle regardless of ROI
      • Buy it, Put it Right Back on the Market in its as-is Condition OR with less than $10k improvements
      • Short Sales Where we Get an Incredible Discount
          • House Needs Little Work
          • EX: 3331 Marmore, Wakehurst,
example roi expected
Example: ROI Expected
  • Example
      • Buy $200k
      • Repairs, Ins, Utilities, Mrktg, etc $50k
      • Sell $350k
      • Loan $250k
          • 25%
            • $62,500
            • Close in 90 Days
            • Divide by 4
              • = the amount they need to earn over 90 days to get to an annualized return
              • $15,625
example roi expected1
Example: ROI Expected
  • Gross Profit
      • $100k
  • Closing Costs
      • 10% of the Sales Price
          • Rule of Thumb
      • $35,000
          • 3% Buyers Agent
            • Title
            • Property Taxes
            • Title Insurance
            • Closing Fees
        • 3% Seller Concessions
        • 1% Misc.
            • $600
roi expected3
ROI Expected
  • Adjusted Gross
      • $70k
          • Before Private Lender Interest
  • Net
      • $70,000 - $15,000
      • $55,000
sweet spot
Sweet Spot
  • Easy Money
    • $50k - $500k
        • 35 – 55 Year Olds
          • OLD 401k, OLD IRA $
          • “Regular Guy”
            • Medical Sales
            • Police / Fire
            • Banker / Brokers
            • Engineers
            • Managers / Ops Mgrs.
            • Steel Worker
              • “Average Joe”
case study 14 1297 steve dr akron oh
Case Study #14 1297 Steve Dr. Akron, OH
  • Bought June 2013
  • Bank foreclosure
  • Paid $50,500
  • Improvements $36,000
  • Private Money $90,000
  • Funded by private lender via Self Directed IRA
  • Just Listed $149,000
  • Gross Profit Potential $63,400
  • Net Profit Goal $40,000
sweet spot1
Sweet Spot
  • Tough Crowd
    • $1,000,000 in assets +
        • Clients are Married to their Financial Advisors
        • Stock Broker
        • Financial Planner
        • Attorney
            • Special Treatment
              • Access to private money managers who $1M < don’t have access
sweet spot2
Sweet Spot
  • Tough Crowd
    • Little Old Lady/Man
        • 70 + Years Old
            • All They Tend to Care About is Security
            • 1-2% is just fine with them
    • Son or Daughter
        • Manages Their Money
        • The Last Thing Your Son or Daughter is Going to do is put Their Momma’s Money at Risk
    • Test
        • They Will Test You with Small Money
        • $1M Client Gives $80k
professional financial advisors investment managers
Professional Financial Advisors / Investment Managers
  • “Selling Away”
      • Cannot Sell Financial Products / Instruments That Their Broker Dealer hasn’t Endorsed / Registered
      • 22 Page Affidavit Every year
  • Securities Dealers
      • These are not Sources of Leads because They Cannot “Sell Away”
iplan group erika kelly 440 484 5566
IPlan GroupErika Kelly (440) 484.5566

Free 30 Minute Strategy Session

Jill Banner, Found and CEO

Erika Kelly, Client Relationship Manager

(She’s Here at HUD Summit)

Kayla Stone, Client Relationship Manager




The IRS code doesn't tell you what you can invest in. It tells you what you can't invest in.

~ Life Insurance

~ Collectibles, which include:

+ Works of art

+ Rugs

+ Antiques

+ Gems,

+ Stamps

+ Alcoholic beverages

+ Metals & Coins (except certain Bullion & minted coins)

~ Stock in a Sub-Chapter S corporation



Generally, a prohibited transaction is any improper use of your IRA account by you, your beneficiary, or any disqualified person, such as:

~ Borrowing money from it

~ Selling property to it

~ Receiving unreasonable compensation for managing it

~ Using it as security for a loan

~ Buying property for personal use (present or future) with IRA funds



For IRAs or 401(k)s, a disqualified person is:

~ The IRA holder and his or her spouse

~ The IRA holder’s lineal descendants, ascendants and their spouses

~ Investment advisers and managers

~ Any corporation, partnership, trust, or estate in which the IRA holder has a 50 percent or greater interest

~Anyone providing services to the IRA, such as the trustee or custodian

(See IRS Section 4975 for a complete list of prohibited parties)

investing with ira s consequences of doing it wrong
Investing with IRA’s? Consequences of DOING IT WRONG
  • There are possible severe consequences for you as the owner of the retirement account and for the other person(s) who participate in a prohibited transaction, including:
    • The investment being treated as a distribution, which may trigger a taxable event
    • An early distribution penalty of 10% if you are under the age of 59½ A 10 percent penalty for early distribution
    • You may incur a 15% excise tax on the amount involved in the prohibited transaction
    • You may be subject to additional penalties which can accrue for under-reporting for the years before the IRS discovers the prohibited transaction
action plan
Action Plan:
  • Make 2 Lists
    • #1 List of People You Already Know
        • Project 100: Discover Your Sphere
            • They can Refer
            • They can Cheerlead
            • They can Lend

Make 2 Lists

    • #2 List of Places You Can go Meet More Potential Partners
        • Golf Courses – Country Clubs
        • Chamber of Commerce
        • REIA Clubs
        • Kiwanis
        • Hondros
        • Kids Soccer Games
        • Kids Basketball Games
  • Hey Josh What Do You Do?
      • “Well, I Raise Capital for Real Estate!”
      • My Favorite
          • “I raise money for real estate deals. I raise money from private investors, I buy foreclosures and pay my investors a fixed double digit rate of return.”
          • “I own a bunch of real estate businesses and I raise capital to fund projects. I work with investors and pay them a fixed double digit rate of return.”
  • Elevator Pitch
      • They Typical Response is:
          • Oh that’s great I’ve always wanted to buy a rental
          • Oh kind of like Carlton Sheets
          • Sounds Interesting, Tell Me More
favorite lines
Favorite Lines
  • Favorite Lines
      • “I've never had a private lender lose money with men and you will not be my first!”
      • “I'm married, you're married, we don’t have to get married!”
      • “Lets do one deal, see how it goes, and then once it goes well we can do the second deal!”
      • “I can use your money but I don’t need it!”
      • Never Act Desperate!!!
favorite lines1
Favorite Lines
  • Favorite Lines
      • “Do you know anyone who’s looking to buy a house, sell a house or who wants to get a aggressive fixed double digit rate of return?”
plan of action
Plan Of Action
  • #1 Develop 12 Second Elevator Speech (use mine)
    • Tell Everyone About What You Do “In A Cool Way”
  • #2 Create Marketing Collateral
      • Handouts & Mailers
          • Investment highlight .doc
          • Improving communities .doc
          • Neighborhood flyer .doc
          • IRA vacation flyer .doc
plan of action1
Plan Of Action
  • Newsletter System
      • 3rd Tuesday of each month
          • Newsletter is due
            • 1st draft
      • 3rd Wednesday of each month
          • Newsletter is approved by me
      • 3rd Thursday of each month
          • Newsletter is finalized and sent to printer
      • 3rd Friday of each month
          • Newsletter is mailed out to everyone on my list
      • MAC – “PAGES”
plan of action2
Plan Of Action
  • #3 Create Funding PowerPoint
      • Josh DFY its in AI members area
      • Millennium Capital Inv 8.27.12 .ppt
  • #4 Create Investor/Partner Questionnaire
      • Josh DFY its in AI members area
      • Evaluation .doc
  • #5 Develop a System for Tracking Potential Private Lenders
      • Show Google .doc
      • Basecamp
plan of action3
Plan Of Action
  • #5 Project 100
    • Brainstorm list of people who you know and know of
  • #6 Send Out a Monthly Mailer to Your List of Physical Addresses
      • People you have a Prior Existing Relationship
      • People you don’t have a PER
  • #7 Email Your Monthly Mailer to Your List of Email Addresses
      • People you have a P.E.R.
      • People you don’t have P.E.R.
plan of action4
Plan Of Action
  • #8 Join Professional Organizations
      • Network with potential investors
  • #9 Make Time Every Week to Network
      • Lunch, coffee, golf, bowling, drinks, appetizers
  • #10 Write Articles: Become a Published Author
      • E-zine Articles
      • Squidoo Lenses
      • Hudpages
      • Credibility and top of mind reference
plan of action5
Plan Of Action
  • Writer
  • Real Estate Commentary
kyle garifo chicago illinois
KYLE GARIFO – Chicago, Illinois
  • Case Study #19
  • Bought the property on Tewksbury in December for $199,300. 
  • Sold on April 5 for $350,000
  • Made $78,405 on the HUD plus the $16,000 left in my account that was not used for repairs for a TOTAL PROFIT of $94,409!

“You tell me if Josh’s 40k Flips Program was worth it!” - Kyle Garifo

6264 w 54 th st case study 22 bought and sold by shlomo t
6264 W 54th St Case Study #22 Bought and Sold By Shlomo T.
  • Lives in TEL AVIV, ISREAL!!!
  • Running $40k Flips in the U.S. Virtually
  • Purchase Price $45,000
  • Improvements $12,000
  • Total Investment $57,000
  • Sold for $85,900
  • Profit $28,900
case study 23 scott benedict san francisco ca 40k flips coaching student in july 2013
CASE STUDY #23SCOTT BENEDICT San Francisco, CA$40k Flips Coaching Student in July 2013

How Fast Can you Make Money with $40k Flips?

“Many investors think big real estate profits are out of the question. $40K profit is NOT out of the question.  I live in CA....and there are deals to be found everywhere.  I just flipped a house, 90days, for close to $200k profit 1 hour south of San Fran.I’m in a deal now in the Bay Area and the projected profit is $120k.  I have subscribed to Josh's $40K Flips System because he breaks it down and makes it easy to understand and use.”

5020 beachwood drive seaside ca
5020 Beachwood DriveSeaside, CA
  • Paid $555,000
  • Rehab $10,000
  • Selling $739,000
  • PROFIT $150,000+
  • Funded with Private Money Partner using Self-Directed IRA as taught by Josh in $40k Flips Program.
  • Negotiated the deal from the short sale lender / Bank of America.
  • Small scope of Rehab to include: kitchen flooring, appliances, carpet in two rooms, some interior paint, update landscaping.