Can You Raise Money From Your Course Students for a Real Estate Deal?
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You can invite course students to invest in a syndication you sponsor, but being a student does not make someone an eligible investor. Each person must pass the exemption's own test: accredited and verified under Rule 506(c), or a person you already have a pre-existing, substantive relationship with under Rule 506(b), who is accredited or, in limited cases, sophisticated. Keep the deal separate from the course. Do not tie access, discounts, bonuses or refunds to investing.
This post covers the student-as-investor question. For the wider question of running a course and a deal side by side, see selling a real estate course and sponsoring a deal and separating the course business from your deal company.
Are students eligible to invest?
Only if they meet the test. Under Rule 506(c), every investor must be an accredited investor and you must take reasonable steps to verify it (SEC, Rule 506(c)). An individual qualifies by income above $200,000 (or $300,000 with a spouse or partner) in each of the last two years, net worth above $1 million not counting the primary residence, or holding a Series 7, 65 or 82 license (17 CFR 230.501). Many students will not meet these tests, which is why a course is a poor way to find investors. Do not assume.
Under Rule 506(b), you may sell to people you have a pre-existing, substantive relationship with, and up to 35 purchasers who are not accredited if each is sophisticated and gets the required disclosure (SEC, Rule 506(b)). A student you mentored over many months may qualify. A person who bought a video course last week does not.
What makes a relationship substantive?
The SEC staff has said the quality of the relationship matters, not a fixed time or a short questionnaire alone (Citizen VC no-action letter, 2015). In practice, you should know enough about the person to judge whether they are suited to the investment. See the substantive relationship test. A mass email to everyone on your student list is the opposite of that.
What is the conflict problem?
You are paid twice: by students for teaching, and by the deal as its sponsor. Students may trust you more because of that teaching, which raises your duty to be clear and fair. Antifraud rules apply to everything you say, including in class (17 CFR 240.10b-5). So:
- Do not pitch the deal in class, in a course community or in a lesson.
- Do not use student results or reviews for your deal.
- Do not suggest that investing is part of learning, or that students who invest will get better access.
What bundling should you avoid?
| Idea | Why it is a problem |
|---|---|
| Free or discounted course access for investing | It is a sales inducement and muddles what the investor is buying |
| A refund of course fees if the deal underperforms | It reads as a promise or guarantee about results |
| "Invest to join the inner circle" | It pressures a decision for a non-investment reason |
| Investment minimums set to match course prices | It treats the deal like a product |
| Student testimonials about the deal | See testimonials in syndication marketing |
If you want to thank investors, do it through the deal's documents, with counsel, not through the course.
How should you treat students who ask?
- Answer with education. Point to free material and your newsletter.
- Do not name the deal in class channels.
- Invite only people you know well, and only after you have chosen your exemption.
- Run the same process for everyone: the same documents, the same questions, the same verification. See turning followers into investors.
- Keep a record of why each person was invited.
Our take
Students are warm contacts, not a pool of investors. The best signal a student gives is attention to detail and a record of acting on what you taught, which you learn by knowing them. If you want a bigger pool than the people you know, run a Rule 506(c) raise with verification and accept that some students will not qualify.
Trade-offs and who this is not for
- Not for educators whose students are mostly beginners. An investment is a different risk from a lesson.
- Not for anyone planning to cross-sell. The two businesses should not feed each other.
- Common mistake: a "student-only" deal webinar sent to the whole list. That is a mass pitch.
- Not a substitute for counsel.
How DoorRaise fits in
DoorRaise helps sponsors raise equity for apartment buildings with 5+ units from friends and followers who already trust them, under Rule 506(b) or 506(c). We are software, legal document preparation, escrow coordination and verification services. We are not a law firm, broker-dealer, investment adviser, funding portal, bank or escrow agent, and we do not hold investor money: investors wire their money to escrow at Enterprise Bank & Trust, in the deal's name.
DoorRaise keeps the deal in its own company with its own documents and a deal page, and verifies that every investor is accredited, in 506(b) and 506(c) raises alike. Flat fees, never a percentage of the raise (see pricing). Create your free sponsor page.
FAQ
Can I sell my syndication to my course students?
You can invite students who meet the exemption's test. A course purchase does not by itself make someone eligible.
Can I give course students a discount for investing?
Avoid it. Tying course benefits to an investment muddies the offer and can read as an inducement.
Do students have to be accredited?
In a 506(c) raise, yes, and verified. In a 506(b) raise, most should be, and a few may be sophisticated purchasers with extra disclosure.
Can I pitch the deal inside my course community?
Only in a 506(c) raise, and keep it out of the lessons.
Sources
- 17 CFR 230.501
- 17 CFR 230.502
- 17 CFR 230.506
- SEC staff no-action letter, Citizen VC, Aug. 6, 2015
- 17 CFR 240.10b-5
This article is general information, not legal, tax or investment advice. Talk to a securities attorney before you invite students to invest. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.