Posted by Brent_IL on August 08, 2003 at 22:14:14:
There is a very thin line between private money and an unregistered security.
The SEC has people whose sole job is to call up vague, optimistic sounding, or investor-seeking advertisements to determine what is actually being offered. If they think that you are doing something that rightfully comes under their domain and should be regulated, or something like a Regulation D offering that is exempt as long as you follow protocol, and you haven?t, they will consider it their duty to put you out of business. Someone may decide make an example of you to dissuade others. Legal fees alone can be staggering.
If you want first mortgage money, ask for first mortgage money. It?s better if you have the note set up ahead of time and offer to sell the existing note. It is also easier to adjust your discount to meet the note-buyer?s interest expectations than it is to quote differing terms and points.
If you are going to spend a couple of hundred thousand dollars on real estate, don?t quibble about 1% of that for a qualified lawyer. Without a lawyer, you won?t have legal fees, but you may not have much of a RE career either. One cautionary opinion.