How to Apply New Rules (Pt. 2)

How to Apply New Rules (Pt. 2)

In part one group investment (not fractionals) was discussed. The broker as an arranger of these groups was also discussed. The fee model for the broker may be difficult when doing these “arrangements”. When is a broker a real estate agent; and when is s/he a securities salesperson? The federal guidelines on this are pretty generous. If one works with investors who meet a special criterion no registration of the investment or the broker is required. If the investment is of a certain size or less, or if there are less than a certain number of investors, on registration is required.

The real question comes from the individual states “blue sky laws”. Each state has different requirements about this type of investing and syndicating these investments. Most of these laws have more to do with the way the investments are promoted than the way they are structured. Many states only regulate investments that are located in other states. My recommendation would be that the agent research the requirements of both state and federal government carefully.

The first projects should fall within the guidelines that do not require regulation. The investment should be small enough that the broker can keep it within a circle of friends. A broker involved in this should very carefully examine their own expertise. S/he should only do those things where there competence is unquestionable. The decision of whether or not to participate in the investment and in what capacity should be determined in the beginning. An agent who has not made successful investments or developments should find someone who has and partner with them.

David Segrest is a REALTOR® in Charlotte NC. His website is http://www.segrestrealty.com His email is david@segrestrealty.com He is also a contributor on Argentina to: http://realestatebloginternational.com/