Key Takeaways
- Capital raised from passive investors is likely a security requiring Regulation D exemption compliance.
- A PPM, subscription agreements, Form D filing, and state blue sky filings are required for compliant capital raising.
- Fiduciary obligations include segregated accounts, accurate records, conflict disclosure, fee transparency, and annual audit above $500K.
- Capital preservation through conservative underwriting, first-lien security, and deal-specific reserves protects investor principal.
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Test Your Knowledge
1.What is the primary purpose of a distribution waterfall in an REI fund structure?
2.What percentage of the portfolio should mature in any single year to manage maturity risk?
3.What is the recommended minimum percentage of portfolio loans on fixed rates?