Michigan Private Lending Law Question - Posted by Downriver Brian

Posted by John Merchant on April 29, 2006 at 18:45:17:

I recently went through figuring this out for myself here in WA state, and I made an appointment with and went to the State Capital and talked to one of lawyers who work in the Securities Division about this very thing.

Unless you’re advertising for investors multi-state, or across a state line, it’s likely that your RE transaction that involves one REI, one property, one D/T, one note, etc…is exempt from state sec. registration.

BUT I’d recommend anybody looking into this make a trip to your Sec. Division and chat with one of those regulators to see what he/she/they think about your plan and what their regisration requirements are.

Most states’ registration requirements are not onerous and I suspect with a careful reading and then with the Sec. Div. lawyer’s help, finding the right form to use would not be a complex or expensive thing to do.

The BIG issue in any Sec. filing (or lack thereof) is always disclosure…did the promoter adequately, legally and fairly disclose the issues, risks, problems, or did he not? If not, and an investor loses money, I think that promoter is going to be in some difficulty.

It’s my arm-chair opinion that anybody who’s made a serious effort to comply with his state’s laws, and has made a really good effort at disclosing every poss8ible risk and hazard to the REI, is not going to be severely punished even if the Sec. Div. feels more should have been done by that promoter.

That promoter will likely get a “Cease and Desist” letter from the State Sec. Division, ordering the promoter to quit whatever act was offending, and that’ll likely be the end…unless the promoter keeps on, or tries to hide his promotions, etc.

Michigan Private Lending Law Question - Posted by Downriver Brian

Posted by Downriver Brian on April 28, 2006 at 12:00:15:

I’ve been researching private lending in-depth, as this seems to be the best method of financing for real estate transactions.
I’ve purchased Alan Cowgill’s courses on the subject, and have his “SEC” Cd’s. The only problem is that the info on SEC regs by state is nothing but a printout of the Michigan statute, which of course is all but impossible to sift through.

Are there limits to the number of investors you can look to get?
Is there any paperwork you need to file with the state?
Anything important things I need to keep in mind?

Also, I know everyone here is going to say, “Go ahead an talk with a competant attorney that specializes in this field.” Unfortunately, I don’t have the $2000 to pay someone to research this issue, which is why I am posting here. Also, I have no idea where I would find an “Private Lending Specializing Attorney”

Re: Michigan Private Lending Law Question - Posted by John Corey

Posted by John Corey on April 29, 2006 at 18:02:08:


I do not have Alan’s materials so I am not sure of what you are considering.

What I think you are asking about is the difference between what is a legal RE deal and what is a securities transaction that is regulated at the state or federal level.

My view and this is definitely not a legal opinion.

You can have as many investors as you like as long as you do not pool their funds into 1 deal and they make decision as to if they want to fund a specific deal. You are not managing their money, you are not making the decisions for them and you are not pooling funds from multiple people into 1 deal.

Send me an email if you want to get into fine details.

Now, you have to be very careful about your advertising so that people realize that you are talking about RE and are not selling unregistered securities.

John Corey