Cohousing-L Mailing List: getting money up front

[Thomas Lofft (tlofft]

Subject: Re: [C-L]_ getting money up front


Not to denigrate your very prudent caution, of which I am fortunately blessed 
with relatively little, but it sounds to me like you've been hyped into a 
frenzied state of fear by a scary lawyer seeking a fast road to personal riches 
by drafting your security filings, which will undoubtedly very expensive.

 

We started Liberty Village with an offer by five burning souls to buy a piece 
of land.  When the offer was accepted, we pooled $5,000 each to create the 
earnest money deposit and also created a Limited Liability Partnership (LLP) to 
become our entity.  Before our organization to find land and develop cohousing, 
we had never met each other.

 

Two years later, after we had obtained approval of our first round of 
re-zoning, we had expanded the LLP to about ten members and financed the 
acquisition of our acreage with a house on it with a one year Adjustable Rate 
Mortgage (ARM) for 75% loan to value and raised the rest of the down payment 
from personal investments in the partnership.  Another year later, we had 
expanded the LLP to 23 members with equal non-refundable equity investments and 
additional cash investments while we completed the PUD zoning and site 
engineering.  When we had the development approvals, we sold off the improved 
portion of the site (15% of the land) for 3/4 of our acquisition cost, paid off 
the ARM, and placed a $1M land development loan to finance the infrastructure.

 

Thereafter, each homebuyer placed their own combination construction-permanent 
financing to pay for their lot and home construction rolled into a permanent 
mortgage at completion.  The lot payments to the LLP paid off the lot release 
from the development loan. No guts, no glory.  Today we have 18 happy 
households living in Liberty Village with infrastructure in the ground and 
zoning approval for 20 more lots.

 

Tom Lofft

Co-founder, co-developer, Liberty Village, MD

 

 
By pulling your money, have you violated any Security & Exchange Commission 
(SEC) regulations? If people without a history together pool their funds, 
the SEC interprets that as a security. Did your group members have an 
extensive personal/business history with one another? Are you an LLC or 
incorporated? Did you create a security? Please tell. We have avoided 
pulling our funds, because we're new to one another as a group and didn't 
want to run afoul of the SEC. Now we're considering creating a security. 
Van Deist Venice, FL



Thanks for writing.

Tom


                                          
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