What do most new investors overlook when raising capital, and how can a single missing document expose the entire deal?

 

In this episode, Dugan Kelley breaks down the legal side of raising money for real estate deals, especially under Rule 506(b) exemptions. Dugan shares a clear, actionable breakdown of the syndication process, how securities laws apply, and the key legal structures every investor should understand. With over $4 billion in structured transactions under his belt, he walks through the must-have documents, how to avoid legal pitfalls, and the significance of understanding the difference between accredited and sophisticated investors. Whether you're syndicating your first deal or investing passively, this episode outlines what you need to know to stay compliant and protect your capital.

 

 

[00:01 - 05:42] Syndication Basics: What Are You Selling?

• The importance of understanding whether you're selling a security
• Why real estate syndication usually involves securities law
• The role of passive investors and operator equity in typical deal structures

 

[05:42 - 10:53] Securities Law 101: Are You in the SEC’s Jurisdiction?

• What defines a security in real estate transactions
• Why even small deals may trigger SEC oversight
• The need for a Private Placement Memorandum (PPM) in most syndications

 

[10:54 - 15:27] The Six Ingredients Every PPM Must Have

• What the SEC expects in a compliant real estate offering
• The importance of risk disclosures, business plans, and subscription agreements
• Why a company agreement governs everything after the close

 

[15:28 - 20:33] Who Qualifies to Invest: Accredited vs. Sophisticated

• What makes someone an accredited investor (net worth or income thresholds)
• How recent SEC updates have expanded access to more people
• The significance of entity-based accreditation

 

[20:34 - 24:05] Sophisticated Investors: A Gray Area You Need to Understand

• What defines a sophisticated investor and how to evaluate suitability
• Why Rule 506(b) limits the number of these investors to 35
• The risk tolerance, intent, and understanding needed to qualify

 

 

 

Connect with Dugan:

 

LinkedIn: https://www.linkedin.com/in/dugan-kelley-0019b435/

 

 

Key Quotes:

 

“If your purpose is to raise capital and the buyer’s purpose is to receive a profit, you’re selling a security.” — Dugan Kelley

 

“If your deal is missing a company agreement or key disclosures, that’s a red flag—don’t invest.” — Dugan Kelley

 

 

Visit sponsorcloud.io/contact today and unlock $2,000 of free services exclusively for REI Rocks community members! Get automated syndication and investor relationship management tools to save time and money. Mention your part of the REI Rocks community for exclusive offers. Help make affordable, low-cost education summits possible. Check out Sponsor Cloud today!