Syndications vs. Funds (and SEC Traps): Kevin Kim's Playbook for Raising Capital the Right Way

Overview

Derek sits down with securities attorney Kevin Kim (Fortra Law) to demystify raising capital for real-estate deals—covering when to use a syndication vs. a fund, realistic startup costs, 506(b) vs. 506(c) advertising rules, what actually happens when regulators come knocking, and how note offerings compare to LP/GP fund structures. They also hit modern twists like series LLC funds, why most beginners should avoid tokenization, and a pragmatic outlook for late-2025 across SFR, small multifamily, and shaky commercial sectors. If you raise money (or plan to), this is your compliance-and-strategy cheat sheet straight from a former regulator.

Key Takeaways

• Syndication ≠ Fund: A syndication is single-asset and generally cheaper; a fund is a multi-asset blind pool with different risks, control, and scalability.

• Realistic Legal Budgets: Typical legal setup for a basic syndication often ~$15k–$40k depending on complexity; funds cost more. Cutting corners is how sponsors get burned.

• Don't Advertise Illegally: Public "I'm raising money" posts can violate securities laws unless you're properly running Reg D 506(c) with verified accredited investors. Regulator "fishing expeditions" are broad and expensive to answer.

• Debt vs. Equity Capital: Note offerings are simple but create fixed debt-service and maturity risk; equity/fund structures can offer flexibility and potential tax advantages (e.g., REIT-style considerations) but add complexity.

• Modern Structures with Caution: Series LLC funds can isolate assets; avoid "investor cherry-picking" designs that smell like SMAs (adviser issues) and beware accounting nightmares. Tokenization is not for beginners.

• Investor Relations Reality: Small checks often require more hand-holding than large ones; plan your investor base accordingly.

• Market Outlook (late-2025): Opportunity pockets in SFR/small MF; be cautious on office/retail/industrial; private lending deal flow is uneven but capital availability is strong—only do deals you can underwrite.

Why You Should Listen

• You'll learn exactly where sponsors get into trouble with the SEC—and how to avoid it.

• You'll understand which structure fits your strategy today and how to scale it without legal landmines.

• You'll get a practical 2025 lens on which RE sectors deserve your time right now.

Relevant Topics Discussed

Syndication vs. fund basics • True legal costs • 506(b) vs. 506(c) and advertising • Regulator subpoenas & "bad actor" disqualification risk • Debt funds vs. note programs vs. equity funds • REIT-style considerations • Series LLC funds • Tokenization pitfalls • Crowdfunding realities • Investor ticket-size strategy • 2025 macro outlook for lenders & operators.

Time Stamps

• 00:00 – 02:30 Intro & Kevin's background (banking → SEC → securities law)

• 02:31 – 07:30 Syndications vs. funds—what they are, when each fits, realistic setup costs

• 07:31 – 15:00 Social-media money raising: why casual posts trigger securities violations; 506(b) vs. 506(c)

• 15:01 – 21:00 What regulators actually do: subpoenas, scope, legal cost, and bad-actor landmines

• 21:01 – 28:00 Debt (note) programs vs. LP/GP funds—control, leverage, tax angles, and scalability

• 28:01 – 33:00 Series LLC funds, "cherry-picking" traps, accounting headaches; tokenization—who should not do it

• 33:01 – 37:30 Crowdfunding lessons; small vs. large investor dynamics; running clean investor relations

• 37:31 – 40:00 2025 outlook: where opportunity lives; what to avoid; closing advice ("If you can't underwrite it, don't do it.")

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