2026 Guide: How to Raise Capital for a Multifamily Acquisition Using 506c
by Raises.com
This article is general information, not legal, tax, securities or investment advice. Laws, rates and programs change, and the details here may no longer be current. Confirm anything you plan to act on with your own counsel and accountant.
You can legally raise capital for a multifamily acquisition by issuing a Regulation D 506c private placement and structuring the raise as a compliant fund-of-funds vehicle. This approach replaces the outdated co-GP model, avoids transaction-based compensation, and lets you act as the active GP while investors provide equity.
Key Lessons from the Video
- Step 1: Identify the acquisition stage and equity gap. The speaker describes stage two where a lender is added and stage three where the equity gap requires a capital raise.
- Step 2: Use Regulation D 506c (or 506b) to raise from accredited investors. A 506c offering lets you publicly advertise the raise while staying within the exemption.
- Step 3: Avoid illegal co-GP structures that rely only on capital raising. The video notes that paying a sponsor solely for capital raised is transaction-based compensation and is non-compliant.
- Step 4: Create a fund-of-funds vehicle where you are the active GP. By forming your own fund you become the issuer and take an active role in the deal.
- Step 5: Compensate with management fees, not transaction fees. The speaker warns that paying based on capital raised requires a broker-dealer license.
Comparison of Capital Raising Structures
| Structure | Compliance Status | Compensation Model | Sponsor Role | Typical Use |
|---|---|---|---|---|
| Co-GP (traditional) | Often non-compliant when sponsor only raises capital | Transaction-based fee | Passive, only raises capital | Older multifamily syndications |
| Fund-of-funds vehicle | Compliant when sponsor is active GP and uses 506c | Management fee or equity share | Active, sources deals and manages SPV | Modern real-estate and business acquisitions |
| Direct 506c raise without fund | Compliant if sponsor meets investor suitability duties | Management fee or profit share | Active, owns the asset directly | Single-asset purchases |
| Broker-dealer placement | Compliant by virtue of registration | Placement fee | Facilitates raise, not sponsor | Large institutional raises |
Applying the Fund-of-Funds Model to Your Acquisition
Start by forming an LLC or SPV that will serve as the issuer of the 506c offering. Draft a private placement memorandum, subscription agreement, and operating agreement that outline the sponsor's active role. Use a flat-fee service like Raises.com to receive a complete deliverable package: fund structure, PPM, CFA-style pro forma, data room, pitch deck, and introductions to equity and debt investors. Once the documents are ready, launch the 506c campaign, market it to accredited investors, and close the equity round before securing any senior debt.
Frequently asked questions
How does a 506c offering differ from 506b?
506c allows public advertising of the raise while 506b relies on a pre-existing relationship with investors.
Can I pay a sponsor only for the amount of capital they raise?
No, that is considered transaction-based compensation and requires a broker-dealer license.
What is the minimum equity needed for a fund-of-funds vehicle?
The video does not specify a minimum, but sponsors typically contribute enough equity to demonstrate skin in the game.
Is a fund-of-funds structure suitable for buying a single business?
Yes, the model works for single-asset acquisitions as long as the sponsor remains the active GP.
Do I need a securities attorney to file a 506c?
While not required by law, a qualified attorney helps ensure the offering complies with SEC rules.
Next Steps
Ready to structure a compliant raise for your next deal? Learn how it works at Raises.com and book a call to get started.
General information, not legal, tax, securities or investment advice. Laws, rates and programs change, and the details here may no longer be current. Confirm anything you plan to act on with your own counsel and accountant.