1. How to Crowdfund a House

2. Disclaimer: This is NOT LEGAL ADVICE !

3. Buying property $ from individual investors. Win-Win: Access to financing Ethical investments

4. Not donations

5. What would this make possible?

6. Stability

7. What would this make possible? Stability

8. What would this make possible? Stability Savings

9. What would this make possible? Stability Savings

10. What would this make possible? Stability Savings

11. What would this make possible? Stability Savings Community

12. Lets slash property prices (not values)

13. Add: $100,000 for remodeling – add 2 bedrooms (maybe 1 more bath) Total: $600,000 Price per household: $300,000 Financed (4.5% for 30 years): $1520/mo

14. Split 3 ways! No remodeling needed! Total price: $549,000 Price per household: $183,000 Financed (4.5% for 30 years): $927/mo

15. Split 4 ways! No remodeling needed! Total price: $949,000 Price per household: $316,000 Financed (4.5% for 30 years): $1601/mo

16. Legal strategies

18. CA residents only intrastate exemption

19. Legal strategies CA residents only intrastate exemption Secret loans to CA residents (??) § 25102(e): any offer or sale of any evidence of indebtedness, whether secured or unsecured, and any guarantee thereof, in a transaction not involving any public offering.

20. Legal strategies CA residents only intrastate exemption Secret loans to CA residents (??) § 25102(e) Small number of investors who know you: § 25102(f): – No public advertising – Sales to no more than 35 investors – All investors have a preexisting personal or business relationship, or by reason of their business/financial experience, could be reasonably assumed to have the capacity to protect their own interests.

21. Legal strategies CA residents only intrastate exemption Secret loans to CA residents (??) § 25102(e) Small number of investors who know you § 25102(f) Private placements § 25102(d) Any offer or sale of a security with respect to a transaction that is exempt from registration under the Securities Act of 1933 pursuant to Section 18(b)(4)(E) of that act…. (=§77r(b)(4)(E), which refers to § 77d(a)(2), transactions by an issuer not involving any public offering. Adds CA notice and fee requirement

22. Legal strategies CA residents only intrastate exemption Secret loans to CA residents (??) § 25102(e) Small number of investors who know you § 25102(f) Private placements § 25102(d) Match Federal Rules 504, 505, or 506 (private) Adds CA notice and fee requirement

23. Legal strategies CA residents only intrastate exemption Secret loans to CA residents (??) § 25102(e) Small number of investors who know you § 25102(f) Private placements § 25102(d) Loans Secured by Real Property, where loans do not have equal priority § 25100(p) A promissory note secured by a lien on real property, which is neither one of a series of notes of equal priority secured by interests in the same real property nor a note in which beneficial interests are sold to more than one person or entity.

24. Legal strategies CA residents only intrastate exemption Secret loans to CA residents (??) § 25102(e) Small number of investors who know you § 25102(f) Private placements § 25102(d) Loans Secured by Real Property, where loans do not have equal priority § 25100(p) Realtors § 25102.5: a series of notes secured directly by an interest in the same real property, or the sale of undivided interests in a note secured directly by real property equivalent to a series transaction, that complies with all of the provisions of Article 6 (commencing with Section 10237) of Chapter 3 of Part 1 of Division 4 of the Business and Professions Code.

25. Legal strategies CA residents only intrastate exemption Secret loans to CA residents (??) § 25102(e) Small number of investors who know you § 25102(f) Private placements § 25102(d) Loans Secured by Real Property, where loans do not have equal priority § 25100(p) Realtors § 25102.5 CA Qualified Purchasers § 25102(n) – Net worth $500,000 (excluding home, furnishings & cars) or – Net worth $250,000 (excluding home, furnishings & cars) plus gross income over $100,000 – Can only invest 10% of net worth

26. Legal strategies CA residents only intrastate exemption Secret loans to CA residents (??) § 25102(e) Small number of investors who know you § 25102(f) Private placements § 25102(d) Loans Secured by Real Property, where loans do not have equal priority § 25100(p) Realtors § 25102.5 CA Qualified Purchasers § 25102(n) – Advertising in prescribed form: brief description of issuer, certain legends/warnings, call this number for more info. – Written only. – Notices required.

27. Legal strategies CA residents only intrastate exemption Secret loans to CA residents (??) § 25102(e) Small number of investors who know you § 25102(f) Private placements § 25102(d) Loans Secured by Real Property, where loans do not have equal priority § 25100(p) Realtors § 25102.5 CA Qualified Purchasers § 25102(n) Rule 506(c). ADVERTISING OK!!! Sales to Accredited Investors Only. – Net worth exceeds $1M (excluding home), or – Income over $200,000 or $300,000 w/ spouse

28. Legal strategies CA residents only intrastate exemption Secret loans to CA residents (??) § 25102(e) Small number of investors who know you § 25102(f) Private placements § 25102(d) Loans Secured by Real Property, where loans do not have equal priority § 25100(p) Realtors § 25102.5 CA Qualified Purchasers § 25102(n) Rule 506(c). ADVERTISING OK!!! Sales to Accredited Investors Only. Investment Crowdfunding under the CROWDFUND Act (part of JOBS Act) (15 U.S.C. §77d(a)(6)) – Will be legal soon?????? – Raise up to $1 M in any 12-month period; – Limit per investor: $2,000 or 5% of income/net worth, or if income or net worth is over $100,000, then 10% of income or net worth up to $100,000 – Must use a Portal, which is going to be highly regulated – Disclosures/documentation required – May not advertise the terms of the offering, except for notices which direct investors to the funding portal or broker.

29. Legal strategies CA residents only intrastate exemption Secret loans to CA residents (??) § 25102(e) Small number of investors who know you § 25102(f) Private placements § 25102(d) Loans Secured by Real Property, where loans do not have equal priority § 25100(p) Realtors § 25102.5 CA Qualified Purchasers § 25102(n) Rule 506(c). ADVERTISING OK!!! Sales to Accredited Investors Only. The CROWDFUND Act Subdivided Lands § 25100(f)

30. Legal strategies CA residents only intrastate exemption Secret loans to CA residents (??) § 25102(e) Small number of investors who know you § 25102(f) Private placements § 25102(d) Loans Secured by Real Property, where loans do not have equal priority § 25100(p) Realtors § 25102.5 CA Qualified Purchasers § 25102(n) Rule 506(c). ADVERTISING OK!!! Sales to Accredited Investors Only. The CROWDFUND Act Subdivided Lands § 25100(f) Register the Security = Direct Public Offering (special regs for real estate)

31. Legal strategies CA residents only intrastate exemption Secret loans to CA residents (??) § 25102(e) Small number of investors who know you § 25102(f) Private placements § 25102(d) Loans Secured by Real Property, where loans do not have equal priority § 25100(p) Realtors § 25102.5 CA Qualified Purchasers § 25102(n) Rule 506(c). ADVERTISING OK!!! Sales to Accredited Investors Only. The CROWDFUND Act Subdivided Lands § 25100(f) Register the Security = Direct Public Offering Nonprofit § 25100(j) – Organized exclusively for educational, benevolent, fraternal, religious, charitable, social, or reformatory purposes… – Can sell securities EXCEPT loans … ????

32. Legal strategies CA residents only intrastate exemption Secret loans to CA residents (??) § 25102(e) Small number of investors who know you § 25102(f) Private placements § 25102(d) Loans Secured by Real Property, where loans do not have equal priority § 25100(p) Realtors § 25102.5 CA Qualified Purchasers § 25102(n) Rule 506(c). ADVERTISING OK!!! Sales to Accredited Investors Only. The CROWDFUND Act Subdivided Lands § 25100(f) Register the Security = Direct Public Offering Nonprofit § 25100(j) Agricultural Cooperatives § 25100(m); Food and Agriculture Code §§ 54001 – 54294. See also 15 U.S.C. § 77a(c)(a)(5)(B)

33. Total price: $549,000 Downpayment: $120,000 Need to Raise: $429,000 §25102(n) CA Qualified Purchasers 100 loans of $4,290 each? 5% for 5 years $8095.76, $2699/mo/household

34. CHALLENGES Long-term loans? Doing the work Showing it will be a good investment (aka why not just get a bank loan?)

35. Solutions 1.Form a group, the more sharing, the better Cheaper per person Easier to show its a safe investment 2.Self-directed IRAs 3.Intermediaries e.g.: patch of land, PRIMARQ, fundrise, crowdstreet, realtyshares