Insider Secrets Podcast Season 2, Episode 32
Guest: Bethany LaFlam
Subscribe to Multi-Family Insider Secrets on your favorite podcast app:
Guest Bio:
Bethany LaFlam is a powerhouse attorney, active real estate investor, author, and transformational speaker with a profound knowledge base in SEC law, mergers & acquisitions, and real estate investment strategies. As the managing partner of Premier Law Group, Bethany has carved out a niche as one of the leading legal experts in private securities offerings, helping real estate investors navigate the complexities of raising capital, structuring deals, and scaling businesses. In short, she helps real estate syndicators practice Safe SEC.
Bethany began her career more than two decades ago in corporate law, specializing in mergers and acquisitions and guiding startups through the intricacies of growth and exit strategies. Her sharp legal mind, combined with her talent for structuring highly profitable and compliant deals, has earned her a reputation as a trusted advisor to some of the biggest names in the real estate world. Leveraging this experience, she pivoted into the world of real estate investment, where she acquires and transforms luxury resort properties and boutique hotels across the globe.
As a public speaker and thought leader, Bethany is passionate about empowering others to build conscious wealth through access to strategic investment opportunities, education, and transformational mindset shifts through personal development. Her upcoming book, which explores the concept of scaling wealth through conscious capitalism and leveraging Other People’s Everything (OPE), inspires entrepreneurs to think bigger, dream bolder, and create lasting legacies.
In addition to her legal and real estate work, Bethany co-leads exclusive retreats and masterminds that offer immersive experiences designed to elevate participants’ businesses and personal lives. Through her retreats and the Conscious Capitalism Collective membership platform, Bethany offers insider access to unparalleled investment opportunities and a supportive community of like-minded individuals committed to scaling their wealth, businesses, and experiences.
Beyond her professional achievements, Bethany is also a devoted mother and a firm believer in living an extraordinary life filled with purpose, passion, and adventure. Her personal mission is to inspire others to embrace holistic abundance and lead by example in both business and life. Whether it’s in the boardroom, on stage, or at one of her luxury retreats, Bethany LaFlam is dedicated to helping people unlock their full potential, scale with integrity, and create extraordinary legacies.
https://youtu.be/dAH1_Ck24fQ
SHOWNOTES
Key Takeaways
Trust is built over time through consistent behavior and open communication. It’s vital in real estate partnerships to inspect what you expect.
Enter partnerships cautiously. Align strengths, roles, and long-term goals before committing, as partnerships often last several years.
Raising capital isn’t enough; successful syndications demand operational expertise to run a viable business.
Understanding the SEC rules about soliciting investors and their accreditation is crucial to staying compliant.
Preferred returns ensure prioritized payouts but only if funds are available, and they are not guaranteed.
Engage legal counsel early in the acquisition process, ideally after a signed LOI but before due diligence ends, to ensure all compliance requirements are met.
Standout Quotes
“Trust is built through consistent behavior and open communication.” – Mike Morawski
“Business is not like a marriage; you can’t just jump into it and see what happens.” – Bethany LeFlam
“You’re not raising capital to raise capital; you’re raising capital to run a business.” – Bethany LeFlam
“Anything you say must be true and not misleading without further context.” – Bethany LeFlam
“Preferred returns aren’t guarantees; they’re priorities, provided the funds exist.” – Bethany LeFlam
“You can’t advertise or solicit until you’ve shut down a 506B and transitioned to a 506C.” – Bethany LeFlam
Episode Timeline
[0:00 – 2:30] Opening thoughts on trust and successful partnerships.
[2:31 – 5:00] Building trust through consistent communication in business and partnerships.
[5:01 – 8:00] Importance of aligning roles and skills in real estate partnerships.
[8:01 – 11:00] Pitfalls of casual partnerships and how to avoid them.
[11:01 – 14:00] Why operational expertise is more critical than raising capital.
[14:01 – 17:00] SEC rules on 506B vs. 506C and the importance of compliance.
[17:01 – 19:00] Preferred returns: what they mean and the misconceptions.
[19:01 – End] Transitioning from 506B to 506C syndications and final advice for new investors.
Contact
LinkedIn: https://www.linkedin.com/in/bethanylaflam/
Instagram: https://www.instagram.com/bethany_laflam/?hl=en
TRANSCRIPT
Kristen: [00:00:00] Welcome to this edition of Insider Secrets, the weekly podcast that turns real estate investing goals into reality. Each show, we interview guests who are seasoned real estate professionals actively closing and managing real estate deals. Mike is the founder of My Core Intentions and would like to help you make your real estate investing dreams a reality.
Mike coaches you to buy investment real estate, creating short term cashflow and long term wealth. Your host and real estate coach, Mike Morawski has more than 30 years of real estate investing and property management experience. Here’s your host, Mike.
Mike Morawski: Hey, good morning everybody and welcome back and I hope that you are having a great weekend. I’m super excited about this morning’s episode and our guest, we’ll get to Bethany here in a minute. But I always start in the morning and I talk about a word, right? Today I want to just bring up the word trust. I think that as we get into [00:01:00] today’s conversation, trust will come up a lot in that.
But I specifically want to talk about trust around picking partners. I see a lot of people, they show up at an event, they go to a seminar, they meet somebody for the first time and they say, Hey, I think we’d be great partners.
I’ve even seen it on the other end and had my own personal experiences where I’ve had friends for multiple years, 20 years, go into business with them and trust gets broken. So I really believe that when you’re putting together a team and you’re picking partners for yourself and you’re building your multifamily platform, that having people around you that you can trust is critically important.
I know today, my partner in my business is somebody that I thoroughly trust. That doesn’t mean that we don’t check on each other. And we look at what each other’s doing and talk about the movement of money and the progress on properties. But it does [00:02:00] mean that you have to rely on somebody to give you that security that you’re building in the right direction together and your values all align, and that you’re in the same direction.
So we’re going to get into that probably a little bit more today, but let me talk about my guest for a minute, Bethany LeFlam, from Orange County, California. She’s a partner in the premier law group. She specializes in securities law specifically for real estate syndicators. So you’re in the right place if you’re a real estate syndicator, just getting started in the business or somebody looking to scale, really excited about today’s episode. Let me bring Bethany back in. Hey, good morning. How are you?
Bethany LeFlam: Good morning. I’m wonderful. How are you?
Mike Morawski: I’m great. I’m great. It’s great to see you again.
Bethany LeFlam: You too.
Mike Morawski: Super excited. I was on the phone this morning with my sister and her son lives in Denver and she was saying, man, they’re expecting two feet of snow between [00:03:00] today and Saturday, and I’m like, I’m so glad that I don’t have to deal with that anymore. Living in Southern California, most days it’s 72 and sunny, right?
Bethany LeFlam: Yes. Yes. It’s crazy expensive to live here and I just call it the weather tax. I’ll pay it.
Mike Morawski: Yeah. Hey, so as I get started on all my podcasts and that, I always ask one question. I do this because my next book, and we’re going to talk about your book today, but, my next book is going to be that one word. And I always ask people at the beginning, what’s the one word that best describes you personally, professionally?
Bethany LeFlam: So I’ve thought about that since, the five minutes ago. And I heard your word trust and I really love that word. And I’m so happy that we’re going to talk about that today. But I think for me, my word is audacious. And I know that sounds weird. Like, wait, you’re a lawyer. I mean, come on.
But the reality is I am audacious. I am more an entrepreneur. I think than I am a lawyer. And I believe that if I really, really want something, I can do it. I can always do it. And I also believe that if [00:04:00] you really, really want something and you want my help, I can help you get it. And so some people think that’s audacious. So I think audacious is probably, it’s a word that I really like too. It’s like, who the hell do you think you are?
Mike Morawski: Yeah, it’s kind of cool. It’s like, Hey, I thought you were humble.
Bethany LeFlam: No, I’m not.
Mike Morawski: Oh, which is pretty evident by social media sometimes.
Bethany LeFlam: Yeah. Yeah. No, that’s really me. I think, within reason, do I think I can do it all by myself though? No, I don’t.
Mike Morawski: I think part of being audacious is you have to really like not care what other people think.
Bethany LeFlam: Yeah. Yeah. That’s a challenge. I will admit. I am sort of a recovering people pleaser. So I think audacious might have been me sort of swinging out from caring too much what other people thought like, no, no, no, no, I don’t need to do that. And so that might have just maybe been a little bit of an overcorrection.
Mike Morawski: Yeah, I love that word though. I’ve been doing this for like 3 years. So I have a repertoire of words, and I [00:05:00] don’t think anybody’s ever said audacious.
Bethany LeFlam: I don’t know that it always has a positive connotation, but I think it should.
Mike Morawski: Yeah. Yeah. I would agree. Yeah. I think it could be positive though. It could be really positive. Cause it’s what people perceive you and that’s what attracts people to you.
Bethany LeFlam: I hope so.
Mike Morawski: Hey, so why don’t you talk a little bit about your background, Bethany, and your history and how you joined forces with Mauricio and what you guys are doing today?
Bethany LeFlam: Yeah, so I’ve actually been practicing law. I hate even saying this because it ages me, but I’ve been practicing law for 25 years now. And, I started off in complex litigation. I really hated that, I hated trial work. And then I started doing mergers and acquisitions and securities law for tech companies, venture companies.
Really kind of like complicated, grinded out work. I was working 2500 hours a year kind of thing. So I left that. I was like this [00:06:00] grind. I don’t want to do this anymore. And I actually went to start a fund and it was just really brilliantly complicated fund. Legally sound and impossible to explain to anybody besides me.
So you can imagine and this one was like legally it was sound, but it was really hard to make people understand that. I learned that skill more over time of how to like simplify things for people, but you can imagine it didn’t launch, it didn’t go well because I wasn’t able to really explain it. And it combined real estate with startups and most real estate investors don’t live in the same body as startup investors. Most of the time, sometimes, yes, but for the most part, they want something separate. At least not the same place. So that didn’t go well.
While I was trying to figure out my next move, licking my wounds from having failed at this fund epically, I was mortified. I met Mauricio. And Mauricio was just coming out of being sick. Anybody who knows him knows that back in 2018, he was very sick and he was a solopreneur at the time, the single point of failure in his firm. And it was a wake up [00:07:00] call for him that he needed some help and some support in running his firm.
Cause he’s providing for his family, of course, and he needed some help. And I was like, all right, well, I don’t want to practice law anymore. I hate it. But I will help you while I figure out what I’m going to do. Cause this stuff I can do in my sleep. So I started doing it and I took on, we’ve been practicing the same amount of time.
So, I’m used to being in charge and so I will handle more and more and more. And finally he was like, well, what would it take for you to just do this? And I was like, you can’t afford that. I don’t want to do it. And he’s like, no, but seriously consider it. What would you do?
So I thought about it for a while and I got to tell you, Mike, when I started meeting the clients in this space, the real estate syndicator clients. That’s what made me fall in love with this again. I like helping people build something. I like helping people strategize. What I didn’t like when I was in big law with tech and venture was being treated like the help.
But with this community, I fell in love with these clients, their mom and pop operators. They’re just trying to get out of their W2 job. [00:08:00] They’re building a legacy for their kids. They’re not trust fund kids that are launching a yet another startup in their basement with 5 million in funding from mom and dad.
Not that there’s anything wrong with having a trust fund. I hope my kid has a plethora of trust funds. There’s nothing wrong with that. It’s just, that’s not what I wanted to do. I wanted to help people that grew up like I grew up and build something from nothing. And that’s when I fell in love with that. And I was like, all right, let’s do this. And so we’ve been partners ever since. And, we both got what we wanted out of it, I think.
Mike Morawski: Yeah. Well, knowing Mauricio the little bit that I do and knowing you the little bit that I do, I see there’s a great connection between you guys, just the energy and the spirit between you and I think that that goes a lot to build in a business. You’ve got to have that.
Bethany LeFlam: It does. You said the word trust earlier and he trusts me and I trust him and you can work through. Look, all partnerships have challenges, they all do. We’re humans. But if you have trust, you can work through almost anything, I think.
Mike Morawski: Yeah. So let me ask you. So obviously, when you guys [00:09:00] first met, you didn’t trust each other right from the get go. What do you think helped you build that level of trust to be able to be where you’re today in business?
Bethany LeFlam: Both of us are a little hard headed and we’re lawyers. So we’re evidence based people. I got to know him through his community and people spoke so highly of him. And so his reputation, he’s got a good reputation. And then just almost like trial and error, we would do some projects. I started off just helping him. I wasn’t a partner with him yet. I was just working with some of his clients and so that little bit of I’ll trust you this much and then I’ll trust you this much and then this much.
So it was a little bit of trial and error to see, can I trust you in setting those boundaries? And I think it was really just interacting with the people that knew him and then just examples of how he handled situations. And I think that’s probably true of me. I think for him, it was harder to trust me actually, because that was this business he had already built. And this was his already [00:10:00] existing livelihood. I didn’t even really want to do this. Like, what do I care? He had to trust me.
Mike Morawski: So let’s flip that question. What do you think you did to gain his trust?
Bethany LeFlam: I actually know exactly the moment that the switch flipped and it was one of his long standing clients. Mauricio was traveling a lot. He was trying to get back into it and he’s out speaking more, right? He loves to be out speaking if you know Mauricio at all. And, so he was gone and I was working on a client’s deal. I’ve been doing this for forever as well. So I didn’t feel the need to call Mauricio for every little thing, so I just handled the problem.
And Mauricio came back and he said, so and so, called me and said, that he talked to you over the weekend and you handled this problem. And at first I thought, Oh my God, did I overstep? This is his firm, not mine. I’m so used to being in charge. And I was just like, I’ll do it.
And he was like, no, I’ve never been able to travel and just be left alone and have stuff be handled before. Thank you for just handling it. So it could have gone either way. Some people would have been like, how dare you overstep with my clients. Right?
Mike Morawski: Right.
Bethany LeFlam: And he was like, thank you. Thank you [00:11:00] for picking that up so that I could go be doing what I want to be doing.
Mike Morawski: Yeah. That’s awesome.
Bethany LeFlam: He was like, Oh, okay. I can trust her.
Mike Morawski: Yeah. I have a partner and, her and I trust each other immensely. And it’s pretty interesting because we had entered into a real estate deal in Florida. And so we own some multifamily together and really didn’t like what was going on, and started in conversations about how could we build a business, and go to the next level and do it together.
And I think that a year of conversation got us to a place where we went and bought our next deal. And now we’re a few hundred units into this partnership and, have built this trust between each other. That doesn’t mean that we don’t check in on each other and what are you doing? What’s going on?
Kind of like inspect what you expect, and I think that the continued behavior of things going right and [00:12:00] moving forward builds that.
Bethany LeFlam: Yeah, I agree. Again, you’re kind of testing boundaries as you go. And business is not, like a marriage, you can’t just jump into it. Like, let’s just do it and see what happens, when you do that.
Mike Morawski: Well, that’s what I said at the beginning. I’ve seen so many people, they go to seminar, they go to an event, they meet someone, they go, hey, let’s become partners, what a great idea. And then, years later, they’re not together anymore because they figured each other out.
Bethany LeFlam: Yeah. And that’s okay. It’s harder to do that when you have investors. It’s just hard. It’s like with kids. What do you do with the kids?
Mike Morawski: Yeah. Well, it’s the same thing in a romantic relationship. Just different scenario. Hey, I like your comment about wanting to be in charge. I think that goes back to you being audacious, right?
Bethany LeFlam: Yeah, think it’s just the same way. And so I think sometimes we’re like, yeah, but no, I’m in charge.
Mike Morawski: I could see that. Hey, so let’s talk a little bit about syndications and securities law. And what do you think a new investor needs to watch out for in the world today?
Bethany LeFlam: The [00:13:00] first, I think most important thing you’ve already touched on, which is your partners. Be careful who you get in a partnership with. I see a lot of people, especially coming out of like coaching programs where they’re learning how to do this. Which is wonderful. I love that there are programs to help people learn how to do this so they can create a better life.
But what happens is you get some people like, I don’t know, like it’s like musical chairs, whoever’s the last one standing, I guess we’re partners. And you getting into those partnerships, I think takes away from actually operating the business. So the first thing I think is to very mindfully go into any partnerships. Be in a partnership, because if you’re brand new to it, you need help.
Don’t try to do everything yourself. And you need other people. So that’s the one thing, find out what it is you’re amazing at, and you might not know in multifamily yet. If you’re new to multifamily, you might not know yet, but you generally know what kinds of things you’re good at. Like, I am not going to ever be the underwriter. That’s not going to be me ever.
So I would have to find somebody who’s really amazing at that, and I would need to do my diligence to make sure [00:14:00] they really are, not just like, sure. And then the other part of that is don’t just go find partners that are capital raisers. Don’t do it. You’re not allowed to do it.
Everybody has to have a real role in the business that’s not just capital raising. And so it’s not just, oh, if I go find a capital raiser, we’ll figure the rest out. That is not the first thing you need. That’s actually the last thing you need. You need it, for sure. But you need to know how to run a real business because the only reason people are allowed to raise money from passive investors is to run a real business.
That’s why we’re allowed to do this without a broker dealer license. And so people remember it that way. They remember, I’m doing this to run a business. You better figure out how to run that business before you raise that money, because that’s what it’s for.
Mike Morawski: So that’s interesting. I have a coaching platform and every deal I’m in actually right now, my partner and I are in, we’re in with one of my coaching clients. Actually, my partner was one of my coaching clients when I went in the coaching. So, it gets a great way. My whole philosophy around it is teach people how to fish. And do it the [00:15:00] right way and then help them catch those fish.
Bethany LeFlam: Yeah. And I don’t think there’s anything wrong with that. In fact, that’s what most coaching programs are. It’s like, Hey, how can I arm people to go find me properties? How can I arm people to be good partner? You’re teaching people how to be a good partner to you, hopefully. So that’s a perfectly good way to find partners. I’m just saying, you’ve got to build that trust and due diligence because you’re in it for five to seven years, usually. That’s a long time. If you figure out, I made a mistake.
Mike Morawski: I think one of the things that new people get hung up on or, think they see so much stuff on social media about how to raise capital and market their deal that they think, Oh, I can just go do that. But there’s that difference between 506B, 506C.
Can you talk about that a little bit? Just kind of bring some clarity around that for people.
Bethany LeFlam: Yeah, absolutely. The general role when you’re raising money from passive investors is that if you’re going to accept any investors who are not accredited, meaning they don’t have the [00:16:00] net worth or the income required that the government says, hey, these people are rich enough that they can withstand this loss, that’s accredited.
It’s more than 200, 000 of income annually for the past 2 years and again, in the same year, or more than a million dollars in net worth, excluding the primary residents. Otherwise, everybody owns a home in California is a millionaire. And is accredited. So if you’re going to accept anybody who’s not accredited, the rule there is you’re not allowed to generally solicit or advertise.
No email lists, no social media posts, no billboards. I mean, you’ve got to have a substantial preexisting relationship with every single person you pitch this deal to, if you’re going to allow anyone, even one person who’s not accredited. And even then you’re only allowed to bring it up to 35 of those and everyone else has to be accredited.
So the government really, the SEC really limits how much money you can raise from what they kind of protect is more of a vulnerable segment of society, which is people who aren’t accredited. So you see these people on social media talking about their [00:17:00] deals. It better be a 506 C, where everyone has to be accredited.
So we always advise our clients just put on there, this is 506 C for accredited investors only. So there’s no question. It doesn’t make more easy when I panic and we see it, just say it, so we all know. And then more importantly, if the SEC starts poking around, they could stop right there.
Oh, I don’t need to dig further because they know the rule. And even then when you advertise, you’re allowed to advertise for 506C. You still have to be careful what you say. People think it’s a free for all. You can say we’re not guaranteeing returns, we’re not guaranteeing tax savings.
We’re not guaranteeing any certain kind of payment, even if it’s a preferred return, that’s not a guarantee. So the rule of thumb there is anything you say, first of all, of course it has to be true, but it can’t be misleading without further context. That’s why you see all those annoying disclaimers on everything. When a lawyer gets ahold of it.
Mike Morawski: Yeah. I love the word projected.
Bethany LeFlam: Yes. Well, it’s one of my favorites.
Mike Morawski: Projected. And, it’s pretty interesting when you’re on a call with a passive investor, a new LP, is this [00:18:00] guaranteed, and how would you tell a investor respond to that question. If I say Bethany, is this return guaranteed? What’s the guarantee on this?
Bethany LeFlam: So nothing in securities, nothing in investing is guaranteed. If unless it’s a note secured by the property or personally guaranteed, it does not guarantee. However, when you have a preferred return. So that’s a lot of times what people think, Oh, it’s 8 percent guaranteed if I have a preferred return.
And so all the preferred return means is if there’s enough money to distribute, you’re guaranteed to get yours first until you hit 8%. That’s it. You’re not guaranteed to get anything, but if there is money, you’re going to get yours first. That’s the guarantee. So me as an operator, I won’t take mine until after you’ve gotten yours.
Mike Morawski: At what point in the transactions should an investor come to you and say, Hey, I’m going to put this deal together or I bought this deal, at what point in that process, should somebody come and say, Hey, how do I do this?
Bethany LeFlam: I really like to start talking to people when they’re putting out LOIs, but they really [00:19:00] don’t need us until they’ve probably got assigned LOI. They’ve identified the actual property. They have a signed LOI and then they’re getting ready to go. Do it before the diligence period expires, cause you have to leave yourself enough time to do the compliance paperwork, the offering documents, and then go raise the money. So when you’ve got a signed LOI and you’re fairly certain that you’re going to do the deal, then we can start.
Mike Morawski: So can’t you start a deal like a 506B and then convert it to a 506C? There’s a process around that, right?
Bethany LeFlam: Yeah, there is. And I love this for first time syndicators too, because you can get mom and grandma in if they’re not accredited. And then you can go advertise if you couldn’t finish the whole deal. I don’t know about you, but most of my family’s not accredited and I wouldn’t be able to raise very much from them. So I would have to advertise.
But if I wanted to let them come in, I’d have to start with a B. So what you do is you start off in stealth mode with people you know really well, that substantive pre existing relationship and you talk to them and you raise as much as you can there. One on one conversations, maybe a small webinar [00:20:00] with personal invitations for the people you know well, and you raise as much as you can there.
We put in the documents and we say, Hey, this is what’s going to happen. We’re going to have a second class of investors. We’re going to close down this 506 B. We’re going to create a new class for the 506 C investors coming into the same property, same operating agreement, same company. Different PPM, different risk disclosures. And then we shut the B down when you’re done.
And after that date that you shut it down, you’re not accepting any more money from any non accredited investors. And even the accredited investors that come in after that, you’re going to now start verifying that they’re accredited, because in a 506 C, you have to verify they are. The minute you’ve advertised or generally solicited, 506 B is off the table as an option. So you can never go the other way.
Mike Morawski: Yeah. But when I have a 506 B, I can let an accredited investor invest in that.
Bethany LeFlam: Oh yeah. For sure. If you know them.
Mike Morawski: I just can’t advertise, right?
Bethany LeFlam: That’s right. People mistake that a lot. They say, Oh, I’m going to do the non accredited one. No, that’s not what it is. It’s that you can’t advertise and then you can accept some non [00:21:00] accredited, but you’re probably going to always accept some accredited. You’re not gonna do a whole deal with only non accredited investors. You can only have 35 of them.
Mike Morawski: Yeah. It’s kind of hard to fill a five or $10 million deal with all non accred. But it gives the non accredited some options though, invest to get their feet wet. And you kind of alluded to it early on is that you’re really helping people, you’re helping people create wealth. You’re helping people do business. You said helping people leave their W2.
Bethany LeFlam: Yeah.
Mike Morawski: Yeah. What kind of paperwork is there that investors need to fill out or that you guys file, what does that look like?
Bethany LeFlam: So the SEC, when you’re raising money for passive investors, there are three options to make sure that’s legal. Because again, I told you there are very limited circumstances. One of those is you’re going to register the offering. That’s like a public offering like Facebook or Microsoft. We’re not doing that here. It’s really expensive, takes a long time. That’s not going to ever work with your 45 day diligence, period. So we then have to go to the next level, which is an exemption.
So we’re not registering these securities. [00:22:00] This is where we’re talking about the 506B, 506C. It’s a Reg D exemption from registering a security. What that means is you’re not registering with the SEC, but you do have some other hoops you have to jump through to be allowed to do that. And the biggest one is you’ve got to disclose all the risks to your potential investors before they invest.
So what that comes in the form of is a private placement memorandum. It’s usually a pretty long, scary document that talks about all the risks of investing in this particular deal. The risks of investing in real estate, the risk of investing in insecurities, the risks of investing in this particular property with this particular operator.
So this is not one of those check the box things of, Oh, I have a PPM. The PPM has got to be specific to the deal. Otherwise it’s meaningless to the investor. Talks about what kind of fees and compensation the sponsor is going to get, all the things. So the PPM is the thicker document that’s required to disclose risks to your investors.
Then there’s the operating agreement. That’s just the agreement how [00:23:00] everybody becomes members of the LLC that they’re all partnering in because your investors are partners with you. They’re passive partners, but they’re partners. So the operating agreement is that document that operates, that tells the investors and the sponsors how the rules are going to work once you are in business together.
Then there’s what’s called a subscription agreement. That is the agreement that says, Hey, as an investor, I’m agreeing to give you this money, and I understand I could lose it. This is how much all that. So a subscription agreement is basically the contract that says, I’m giving you my money. And then the investor questionnaire is really for the issuer or the sponsor, their protection. You’re going to get information from me as an investor to make sure I’m a suitable investor.
So if it’s a 506B, you at least want to make sure I’m sophisticated enough to get into this deal. You do not want to take someone’s last $10, 000. You don’t want to take someone’s $10, 000 who has no clue what’s going on. There are rules against that. So I have to be at least sophisticated. If it’s a 506 C, then you need to have me fill it out so that you have information about me. You have to take even an extra step [00:24:00] and then go make sure I’m accredited.
So that’s the packet of documents you’re getting. And then you probably started the whole process. I call it a business plan, but it’s really a pitch deck. It’s a can of our PowerPoint slide deck that says, Hey, this is a beautiful and amazing property. We’re amazing operators. You should invest with us.
That’s the marketing document. We attach that to all of these other documents because they should all be consistent. Closing your PPM better match what you’re telling people you’re going to do and your business plan. So we put it all together.
Mike Morawski: It’s interesting. And you help investors put all that together and then you do the SEC filing for them, right?
Bethany LeFlam: Yeah. So after that we let the SEC know hey, we are raising money, but it’s under an exemption. So that’s called the form d. And then we’ll do the blue sky filings, which every state wants to know, are you raising money in our state? And then they want a fee. So we file those for people too.
Mike Morawski: Yeah. So every state you have to file blue sky in, and that’s just making that state aware that you have an investor from that state, that’s going to invest in your deal.
Bethany LeFlam: Yeah. So it kind of puts [00:25:00] everybody on the radar and make sure that there’s no fraud going on or all the things. And of course it’s a revenue generator for the state. Some states are more than others. So I always tell people, if you’re raising money in New York, for example, you should get lots of investors in New York because you have to pay $2, 000 anyway, and you only pay it for the one time. So if you have one investor or 20 investors in New York, it’s the same fee.
Mike Morawski: Does that kind of run the same way like on the institutional level? So we’re talking really about LPs, limited partners, those passive investors, but how about when you start to go into the family office funds or into institutional money, are you still filing blue sky on those?
Bethany LeFlam: No, that’s a little bit of a different process. And most of our clients, they’re mostly retail investors, like the passive LPs, that were individuals. So we’re not really dealing with that, but usually with the family offices and the private equity firms and that kind of thing, they’ve got their own protection set up. And so it’s sort of a different beast.
Mike Morawski: Okay. So, what’s interesting is that everything you do has got a different process.
Bethany LeFlam: Kind of. I’m a [00:26:00] process person, so I really like to have as much of process as possible just because it helps us get our client’s documents done faster and cheaper. But yeah, it’s a little bit different depending on what you’re doing. So for example, if you’re going to advertise, we do it a little bit differently than if you’re not going to advertise, but for the most part, the securities laws are the securities laws. So the process isn’t going to change wildly. It’s just the contents that’s going to change a little bit.
Mike Morawski: Yeah. So, I encourage everybody that when they get to the point where they’re going to bring a deal out or they get a deal under contract to immediately get in touch with you and Mauricio and get that process started so that they stay legally compliant.
Bethany LeFlam: Yeah. And I’ll add right there. Sorry to cut you off. I’ll add there. We also help people stay compliant when they’re talking about their deal. So the SLC regulates the offer and the sale of security. So when you’re out talking about your deal with your pitch deck on a webinar, on social media, on [00:27:00] a podcast, we make sure that you know what you are and are not allowed to say.
So it’s not just, here’s a stack of documents, have fun. We’re helping you stay compliant from jump all the way up until you’re filing those form D’s.
Mike Morawski: Yeah. Interesting. Now I think you have a new book out or coming out. Don’t you?
Bethany LeFlam: I do. I have a book. It’s getting released in January. It’s called the power of OPE, the exponential growth from other people’s everything. So we talk about OPM a lot in this community. And, I kind of added to that other people’s everything. And I think that is the best way to scale and exponentially create wealth.
Mike Morawski: Interesting. Any highlights from it you want to share?
Bethany LeFlam: I talk a lot about your team building and sort of the other people that you do want, but the other people that you don’t want. The beginning part of the book is actually, here’s the other people’s stuff that I don’t want you to take on. Other people’s goals for you. Other people’s negativity. Other people’s expectations of you. Things like that.
The book is really trying to encourage people to dig deep and figure out what their [00:28:00] lane is. What are you both amazing at and what lights you up both. Because we’re entrepreneurs. We’re probably good at a lot of crap that we don’t want to do. That we don’t love. We can do it because we’re entrepreneurs, but the whole idea behind true success and exponential growth is to try to stay in that lane that you created that does both.
You’re amazing at it and it lights you up. And I can promise you that there are other qualified amazing people that are good at all those other lanes that don’t light you up. For example, I know people that are really great underwriters. They love it, lights them up. They’re amazing at it. Why would I try to do it? If you’re good at it and want to do it, I’m doing you a disservice by trying to do something worse myself and letting you shine in your lane.
And so the whole idea is to, and that’s a big thing, allow yourself to choose your lane. Be intentional about it, but then allow yourself to stay in it. That’s tough because we’re entrepreneurs. And a lot of times we think that hustle and grind culture requires that we just do everything ourselves, and we let everybody know how hard we’re struggling. And we let everybody know how tired we are and how busy we are, and that’s how we [00:29:00] know we’ve made it. And that’s garbage. It’s garbage. You’re just tired and grouchy. So I think we all get to thrive.
Mike Morawski: Yeah, I just kind of had that conversation with someone this morning about being able to delegate and have other people do things. I have a great assistant and, I know in my life that if I didn’t have that person, that I wouldn’t be able to do half of what I do. You have to be able to delegate and I love what you said about figuring out what you’re good at.
If you’re the underwriter, if you’re the capital raiser, if you’re the compliance person, just figure out what you’re good at and go find other people that are good at the other stuff. And that’s how you build a great team. Kind of funny how circle back to that conversation from earlier in the show, right.
Bethany LeFlam: Yeah. It takes discipline. I think it takes even more discipline to not jump in other people’s lanes. The same discipline if you’re like, oh, I have to do it myself. And I’ve got all this discipline and that’s why I’m doing whatever, it actually takes more discipline to let [00:30:00] somebody do their thing. Cause we all want to be in charge. We’re all entrepreneurs. Probably most of us are visionaries. We want to be in charge.
And it’s like, put your blinders on and senior. Now, every once in a while, check. Make sure everything’s okay. Nobody’s drowning over there. But even if someone, this is the hardest lesson, I think for me. It was the hardest lesson is just to let go because even if someone in that lane is drowning, me jumping in there with them it’s just gonna make us both drown.
What can I do from my lane to help them? That’s what you’ve got to focus on. And I think that takes more discipline than just jumping in that lane with them because you want to be in charge.
Mike Morawski: Yeah, I love that philosophy. It’s pretty good. Hey, a couple bonus questions here as we wind down. So, Southern California, favorite restaurant?
Bethany LeFlam: Oh, easy. Kristakis. It’s a Greek restaurant in Tustin. It’s run by a Greek family and they took it over from mom and dad who since passed and it is the best Greek food that I’ve had outside of Greece ever. And it’s every occasion my daughter and I go there for birthdays, for Mother’s Day.
Mike Morawski: Awesome. I’ll have to get that from you and check that out. So there’s a lot you can do [00:31:00] in Southern California. A lot of places to go. Best tourist attraction?
Bethany LeFlam: Ooh, I’m a beach girl, so, I’m always down for just a good old fashioned beach, Thousand Stairs Beach, and Laguna Beach is really nice. It’s a pain to get to, as you can understand by the name Thousand Stairs. But as a result, it’s not usually very crowded. So I definitely just love, other than parking, it’s free to go to the beach. So I do love that.
I’m not much of a shopper. There’s a really good shopping in Orange County. I don’t like to shop, so that’s not my jam. But if it is yours, then Fashion Island has everything you could ever want, but I would rather be walking barefoot at the beach than shopping.
Mike Morawski: It’s just like my heart. That’s for sure. Hey, I appreciate you being here today. This has been great. Why don’t you tell people how they get ahold of your book, get ahold of you, if they have questions or they want to engage your firm?
Bethany LeFlam: Yeah, absolutely. If you follow me on Instagram, that’s the easiest way to get access to everything that I’m doing and that is [00:32:00] bethany_laflam you can get all the resources and tools there. And in fact, if you’re listening and you want to figure out how to take strangers, like people listening to this podcast, and turn them into 506 B eligible investors, I’ll give you eight steps to turn a stranger into a 506 B eligible investor for free.
Mike Morawski: And they can do that by just following you on Instagram?
Bethany LeFlam: Yeah. If they follow me on Instagram, they can just DM me eight steps.
Mike Morawski: Awesome. All right. Well, listen, hey, I appreciate you being here today. This has been great. I’m gonna move you out and say goodbye. If you’d hang out with me in the back room for a minute, that’d be great.
Bethany LeFlam: Thank you so much. Appreciate you having me.
Mike Morawski: Hey everybody, that was a great episode. We got to talk about trust. We got to talk about team building and relationships and you know what, it kind of brought some light to securities law and didn’t make it so dry. That’s always my concern when you start to get into some details that it can be dry, but I think we brought a life to it that just really [00:33:00] educational for people.
Hey, remember, you can follow us on Facebook where we’re always bringing great content and information out. If you’re new to the show, please subscribe to us on YouTube or any of the social media platforms you’re on. But we’re always bringing you something that you can learn, something that you can grow from or a great guest. Thanks for being here. Have a great week. If I can help in any way, don’t hesitate to reach out and we will see you next week.
Kristen: Thank you, Mike, and thank you for joining us for another great episode of Insider Secrets. As always, Insider Secrets is brought to you by My Core Intentions. Wherever you hang out on social media, you will find Mike and My Core Intentions. Please like and follow us to get the most up to date real estate investing trends.
Visit mycoreintentions.com where you can get expert coaching on all things real estate investing and property management. If you’re looking to become an expert, Mike’s coaching will help you scale your [00:34:00] real estate investment business. We’re looking forward to having you back again next week for more Insider Secrets.
