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Mortgage and Finance : Income Property Financing Last Updated: May 14th, 2012 - 22:24:01

Unique Real Estate Investment Funding You Can Do Yourself

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Unique Funding You Can Do Yourself

Thousands of people rebuild houses, construct their own home, build walls, or other projects- So why not expand this to do-it-yourself financing? Thousands of BWBs are doing just that. You, too, can do the same. Let's see how—right now.

Two Quick Unique Ways to Raise Money Yourself
There are two quick unique ways you can raise money for real estate yourself at low cost. These ways are:
1. Limited partnership to raise $500,000 to $50 million.
2. Real Estate Investment Trust (REIT) for $5 million to $100+ million.

Of these two methods, the Limited Partnership (LP) is the easiest for BWBs and has been used much more often than the REIT. However, we do have RElTs being formed almost every day of the year to raise big money for real estate investment. Let's look at each unique funding method to see how you might use it today.

Use a Limited Partnership to Raise the Money You Need
You can learn how to raise money from a Limited Partnership. Now you'll learn how to form your own Limited Partnership to raise money directly from investors in your partnership.

A Limited Partnership (can raise money for real estate investment at little cost. In a typical real estate limited partnership, you, as the general partner, work with limited partners who invest their money in some aspect of income real estate.

As general partner, you invite limited partners to put money into the partnership in the form of participations. Each participation can be priced at anywhere from $5,000 to $50,000 or more. Thus, if you get 20 limited partners to invest, say $50,000 each, you'll raise 20 x $50,000 = $1,000,000 to invest in income real estate.

As general partner, you have control of the investment funds. You can use them in any way you believe will earn a profit for the Limited Partners. And your Limited Partners are limited in their liability in the partnership to the amount of money they originally put into the partnership.

Thus, if a Limited Partner put $15,000 into your real estate LP, that partner is limited to no more than the $15,000 if an outsider sues the LP and is awarded money for damages or other charges.

To set up your Limited Partnership, take these six easy and direct steps:

1. Write a brief description of your LP, telling what you'll do with the funds you raise. You can do any of several things, namely: a. Buy income properties and manage them for income. b. Lend money to real estate investors to buy, and manage, income
properties. c. Find and buy properties to flip for short-term profits.

2. Contact a competent real estate attorney familiar with Limited Partnerships. Have this person evaluate your proposed Limited Partnership and your plans for it.

3. Decide on how much money you want to raise and how many limited partners you'll need. Today, most advisors will suggest that you have no more than 35 limited partners who are "qualified investors"—that is, have assets of a certain amount, as defined by the Securities Exchange Commission (SEC). Your attorney will advise you on this, using the latest requirements.

4. Prepare your offering for your Limited Partners, This is a one-or two-page document covering the amount of money they put
into the LP and how they will share in the profits earned by the LP. (When preparing the offering and the description of the LP, most people use, as a guide, previously written offering circulars that have successfully raised money. You'll find one such document described at the back of this book.)

5. Sell your participations to your Limited Partners. You can do this personally, or you can have a stock brokerage house do it for you. Their charge is about 12 percent of the amount of money raised.

6. Get your money and start your real estate work—depending on what your LP is organized to do. You—as general partner—will normally own one participation in the LP. This ownership is based on the work you do to conceive the partnership, raise the money, and run it on a day-to-day basis.
Typical real estate LP raise anywhere from S5 million to $50 million. Today, most new LP fundings are in the $5 million to S10 million range. Your ownership cash holding might be $100,000 to $500,000, depending on the number of limited partners in the organization. You will—of course—use these funds for investment purposes to build the LP.

While forming a LP may seem complex, it is really very simple. And the LP can be your unique way to raise money for the income real estate you want to acquire. A reader writes:

Try a Real Estate Investment Trust to Raise Your Money

You can go to any large public library and get the information you need to write your own DOT. And at the same library you'll find the names and addresses of stock brokers who might take your REIT public or private to raise the money you seek.

You can submit your plan in the form of a DOT to a stock broker to see if it can be funded, either publicly or privately. If a stock broker wants to take your REIT public or private, the brokerage house will help you with the legal and other compliance work that has to be done.


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