“What is the difference between an Offering Memorandum and a Private Placement Memorandum and when you should use one versus the other?”.
Here is what we learned:
These are two entirely different documents and cannot be used interchangeably. Make sure you understand the difference and use the appropriate document at the appropriate time.
Let’s start with the Private Placement Memorandum.
If you are going out to the world (and this would even include your brother) and looking to raise money fo your deal, make sure that you have had a qualified securities attorney set you up with all the necessary documentation that you will need to keep you and your investment legal.
I even stress this if it is just your brother who will be funding your deals and for many that sounds like overkill. I can assure you, it isn’t. Here’s why. You and your brother may be the greatest of friends and you know that if you needed a heart transplant, your brother would give you his one and only heart.
That’s beautiful, but that’s not where the problem lies.
The problem is not with your brother. The problem will be with your brother’s widow’s next husband. He won’t like you and will want to get all the money out of that investment. The first thing he will do is to try and come at you and say that you failed to disclose information about the investment and you should lose it. Sounds crazy. Believe me, it isn’t. It happens more often than you think.
Do not try to draft the Private Placement Memorandum yourself.
There are too many issues that will require a qualified attorney to handle on your behalf. Here are some examples; what states are you raising money in? Have you put all the necessary disclaimers for all states in your document? What exception to the registration requirements are you going to use to avoid having to register the investment with SEC? You see, there’s a lot to figure out.
Don’t go it alone.
Now the Offering Memorandum is essentially a marketing vehicle. It should always be incorporated with the PPM so that you can never be accused of trying to raise money from unqualified investors (more on that in a later post).
The Offering Memorandum will not have the legalese that the PPM will have. It will be more “salesy” but nevertheless, it will still include disclaimers to protect yourself and your investors.
For all of Doben’s coaching students, he has uploaded a sample offering memorandum that you can download, mark up and use for any of your deals. This OM was successful in helping the investment group raise over 2,000,000 to buy the property that is being highlighted in the document.
Remember, this was not our Private Placement Memorandum. That was drafted by a securities attorney who also took the time to review our OM and make sure it was “up to snuff”.
If you would like to get a copy of the 35-page offering memorandum template and test-drive the Lifetime Apartment Investor Gold Coaching program for $7 CLICK HERE. The link will explain in more detail all the other forms, templates, contracts and training that our members get. You cannot beat the price, content and access to experts with this program. GUARANTEED.