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Real Estate Investing and Private Lending - How to Avoid SEC Issues in Your Advertising

By Michel Lautensack

Republish: EasyPublish™ Published: 20Jul2009 Word count: 627 Viewed: 101 time(s) Get Free Content For Your Site

Let's talk about a couple of specific things to private lending and marketing. We've talked about marketing right now, but private lending has some uniqueness to it. I want to make sure you guys understand some issues here.

SEC Concerns

There are some concerns about how we advertise with private lending. You're going to find when we go through the individual ways I am not - I repeat not - going to encourage to directly solicit private investors, meaning do not send out a newspaper ad, postcard, flier, letter that says, "I've got a house on 123 Main St. and I'm looking for an investor to lend me $85,000 at 9% interest for 5 years."

I would highly encourage you not to place that kind of ad in any sort of medium. That ad can get you some attention through an SEC inquiry. The SEC is particularly trolling the Internet bulletin boards. You have to be very careful on that.

Two-Step Direct Response Marketing

That goes back to my direct response marketing. One step or two step? We're going to do two step marketing. We're going to send out a postcard, flier, whatever that is going to ask them respond back for further information.

You are going to provide that information. You are going to call them. You're going to send them things. You're going to call them and send them more things. You're going to call them again and send them more things. You are going to have a meeting, possibly two, three or four meetings.

You're going to develop a relationship with that person. You're going to get to know them and understand what their investment objectives are and what they aren't. You are not going to, on the first contact, reach out to them and ask them to buy something or to invest with you directly.

My Personal Experience with Advertising

I got into a lot of trouble a couple years with the Pennsylvania SEC by doing that. I was advertising on Craigslist. What happened was an individual started to respond to my ad and started to show some interest. We emailed back and forth several times. We never talked on the phone, but he continued to email me on a fairly regular basis and encouraged me to send him more information.

I started to send him some info on deals. We probably went back and forth with 15 or 20 different emails. He finally said he was interested in one of my deals and he was going to invest - I don't really remember at this point but it was like $80,000 or $90,000. I had him connect up with my title company and all of the sudden he disappeared. He just disappeared off the face of the earth. I never heard from him again.

About three weeks later I got a letter from my SEC saying that I must cease and desist all advertising on Craigslist. In the letter there were quotes directly out of emails that we had sent back and forth with this gentleman.

I give you this word of warning to try to prevent you from getting into trouble. There's so much going on out there in this world that there is a heightened sense of responsibility from a lot of the public agencies. Honestly, our federal SEC is under a lot of pressure right now to be much vigilant and active.

I think you'll see the same thing happening at our state level SECs They're going to be more vigilant, more active, and supposedly trying to prevent the next Bernie Madoff and things of that nature. Again, I think you're going to see these types of things be much more active.

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