Real Estate Revitilization Fund

In the previous chapter, we spoke about the fundamentals of a CIF. Two popular CIF options that are not as heavily regulated by the Investment Company Act are the real estate revitalization fund and the diversified opportunity fund. Below we will define the real estate revitalization fund, what steps to take, and what documentation may be needed.

What is a Real Estate Revitalization Fund?

A real estate revitalization fund is a type of community investment fund that takes advantage of an exemption from the Investment Company Act for real estate investments. The goal of this fund is to provide revitalization for real estate projects for underserved communities, including housing, main streets, and neighborhood improvements. the fund can offer investors debt, equity, revenue share, or any combination of these deals to raise funds for the purpose of the fund. The capital is then invested into refurbishment or construction of real estate (residential, commercial, industrial, etc) and then sold or leased to the benefit of each investor.

Here are some questions to ask yourself before starting or taking part in this type of CIF:

1. Prepare the necessary documents. Real estate deals are similar to business deals, you must prepare the responsibilities, contingencies, and rewards of each investor that has accepted. It may be necessary to speak to a professional or consult various resources prior to doing so. Examples of such documents include a private placement memorandum, a well-thought business plan, and the investor term sheet.
2. Determine the platform(s) for your offering. When raising capital, it is important to have a mindset akin to marketing. Being careful to remain compliant in your messaging, which we will talk about below, you can choose your platform wisely. This could be a local and private deal only or could range to online crowdfunding sites for larger communities and approvals.
3. Remain compliant. Anytime there is an exchange of money taking place, certain rules and regulations must be adhered to. for example, a cardinal rule when selecting the advertisement for your deal is to never guarantee or induce an investor to believe a specific return is guaranteed, regardless of past results. Legal professionals and financial consultants can steer you in the right direction, as well as a wealth of services available locally and online.
4. Manage your relationships. Your investment pipeline and investor relations process is essential in executing a successful deal. While it is a cause for celebration when a partner is found and funding is received, nurturing this relationship is paramount to the success of the deal. You may need this investor to provide more equity, a loan, or even expertise and sweat equity further down the road. Popular funnel-building sites such as ClickFunnels can provide a platform for deal flow and investor relations.
5. Provide a powerful technical presence. Financial technology has made leaps and bounds, especially in the creation and funding of new businesses. Shows such as "Shark Tank" and "Dragon's Den" have popularized fintech business culture, and as such, there is a myriad of angel and fund management platforms. For simple solutions, look to your local bank or credit union - they may already have a business brokerage account to meet your needs. For the more customized and tech-savvy, seek more specialized angel platforms, such as AngelList.

A real estate revitalization fund has many advantages for real estate investors of all sizes. Since the playing field is so large, it is important to consult federal, state, and local laws to see what documentation is needed to properly start or participate in this kind of fund. Legal professionals and capital firms are the best places to start, as they are usually very knowledgeable in these subjects. A real estate revitalization fund may also qualify for certain grants and exemptions, especially if housing or revitalization is assisting with providing homes for communities that have underserved individuals.

In summary: While most recognize that real estate is one of the best asset classes for return on investment, capital may be difficult to acquire. A real estate revitalization fund can be extremely beneficial for raising capital and forming partnerships with like-minded investors in your community, and also helps keep wealth reinvested within the community. For those looking to take part in other opportunities, stay tuned for Part 5 – (CIF) Diversified Opportunity Fund.