Raise From Friends and Family for a Real Estate Deal

Raising money for a real estate deal from friends and family is the most common way a first sponsor starts. It is also still a securities offering. There is no "friends and family" exemption in federal law, so the same rules apply as for any other raise. Most small raises from people you know use Rule 506(b), which allows a private offer to people you already have a real relationship with but does not allow advertising. DoorRaise is built for this kind of raise: a deal page you share with your own people, documents, accreditation checks and escrow.

This post is part of our guide to real estate syndication. It focuses on the people side. For finding investors in general, see how to find investors for real estate. Rules are as of October 2026.

Why the rules apply to people you know

When someone gives you money to invest in a property they will share in, they are buying a security. The law does not look at how close you are. It looks at what you are selling. Securities laws require either registration with the SEC, which is expensive and slow, or an exemption. Rule 506(b) of Regulation D is the usual exemption for small raises. Read what Regulation D is if this is new.

The rules also include an anti-fraud rule that applies even when an offering is exempt: you may not make false or misleading statements, or leave out facts that matter. Friends and family are people who may trust you without asking. That makes it more important, not less, to be accurate. See Rule 10b-5.

506(b) and the pre-existing relationship

Under Rule 506(b) you may not use general solicitation, meaning public advertising or posting, and also emails, messages or calls offering the deal to people you have no pre-existing substantive relationship with. You may offer to people you already know. SEC staff look at whether the relationship is real and came before the offer, and whether you know enough about the person to judge their financial situation and sophistication. There is no set waiting period. Our guide to followers and the substantive relationship explains how that test works for people you know online. For close family and long-time friends the relationship is usually plain.

Remember:

The relationship should exist before you have the deal in mind, not be built to sell it.
A friend of a friend is not automatically a relationship. If you do not know them, do not offer to them.
If you want to talk about the deal in public, in posts or at events open to the public, you are moving toward Rule 506(c). See 506(b) vs 506(c) and the quick 506(b) or 506(c) tool.

Accredited and not accredited

Rule 506(b) allows up to 35 non-accredited buyers who must be sophisticated, in addition to any number of accredited ones. But if you sell to any non-accredited buyer, Rule 502(b) requires specific disclosure, including financial statements, and the work grows. Our post on Rule 502(b) disclosure explains this as general law.

Accredited investors are people the SEC defines by income, net worth, certain licences or entity type. See who is an accredited investor.

DoorRaise takes verified accredited investors only. A relative or friend who is not accredited cannot invest through a DoorRaise deal. If you are sponsoring a raise, tell them early and kindly, rather than after they have already decided. If you want to include non-accredited people, that is outside DoorRaise and a question for your own securities attorney.

How to start the conversation

You do not need a pitch. You need a clear, calm message that makes no promises and puts no pressure on the other person.

Principles:

Ask permission to share, not for money. "I am putting together a real estate deal. Would you like me to send you the details to read?" lets someone say no easily.
Explain what you are, and what you are not. You are the sponsor. You are not giving personal advice. They should make their own decision.
Share facts and risks together. The terms, the fees you will be paid, your experience, and what could go wrong.
Make no return claims. Do not say what they will earn. Say what the documents say.
Give time. Several days at least. A good deal does not need a rushed answer.
Make it easy to say no. And mean it.

A short script you can adapt:

"I am organizing an investment in an apartment building and I am the sponsor. It is only open to accredited investors, and it comes with risks, including losing money. If it is something you might want to look at, I can send you the deal page and documents to read in your own time. There is no pressure, and I will understand if it is not for you."

Notice what is missing: no number, no guarantee, no deadline. Details like projected figures belong in the written materials, where they come with their assumptions and risks.

Put it in writing

Everything of substance should be in writing, in documents all investors receive.

The offering documents. A private placement memorandum describes the deal, the risks, the fees and the conflicts. The operating agreement sets the rules, and the subscription agreement is the contract to buy. See private placement memorandum and subscription agreement.
The deal page or deck. It should match the documents. See pitch decks.
Risk disclosure. Plain statements that the investment can lose money, that returns are not guaranteed, that units are hard to sell and that you are paid whether or not investors profit (if you are).
Your fees. Everything the sponsor is paid, in dollars or percentages. See syndication fees.

Everyone should see the same information. Do not tell one person more than another, and do not rely on side promises. DoorRaise generates the offering documents for each deal from the sponsor's inputs, and you can have your own attorney read them.

Money and relationship risk

The hardest part of raising from people you know is not legal. It is what happens if the deal does not work out.

Say it plainly at the start. The deal can lose money, and they could lose all of what they put in. Say it in person, and have it in writing.
Do not take money someone cannot afford to lose. If a relative is stretching, say no. It protects them and you.
Do not mix money. Funds go to an escrow account held by an independent agent, not to your personal account. Our guide to escrow in a syndication shows why. Mixing family money with your own is how trust breaks.
Keep investors informed. Send regular updates, good and bad. The investor update guide shows how. Silence causes more damage than bad news.
Plan for the bad case. Know what you will do if distributions stop. See what happens if a syndication loses money.
Keep a boundary between the deal and the holiday table. Talk about the deal in updates, not at dinner.

Records to keep

Keep a simple file for each investor and the raise:

The date you first offered, to whom, and how
What each person received and when
Their signed documents and accreditation evidence
Wire confirmations and escrow statements
Questions asked and your answers
The Form D and state notices. See Form D filing

Good records protect you and them. They also help your securities attorney if a question comes up.

When to move beyond your own circle

Many sponsors raise their first deal from people they know and want more for the next one. If you want to reach people you do not know, the route changes: under Rule 506(c) you may advertise, but you must take reasonable steps to verify that every buyer is accredited. See what a 506(c) offering is and general solicitation. Do not post about a live 506(b) deal publicly while the offering is open. If you plan to move to 506(c), speak to your securities attorney about how to change from one to the other. For how a first deal fits into a plan, read the first-time sponsor guide.

How DoorRaise fits in

DoorRaise gives a sponsor one deal page to share with their own friends and followers, then handles the accreditation checks, the electronic documents, the escrow coordination and the filings. The $500 setup fee is due when you submit the deal and is not refunded. The $5,000 closing fee is paid only if the deal closes and includes state filing fees. The yearly fee is $3,500. DoorRaise is not a law firm, broker-dealer or escrow agent, and does not hold investor money. See the deal page feature for what investors see.

Raise your apartment deal from the people who already follow you.

DoorRaise is built for apartment buildings with 5 or more units: one link for the deal, escrow until closing and a standard fee card.

Launch a deal See the fee card

Create your sponsor page or see pricing.

FAQ

Do I need to follow securities rules if I only raise from family?

Yes. There is no exemption for friends and family as such. Most small raises use Rule 506(b), and the anti-fraud rules apply to every sale.

Can I take money from a relative who is not accredited?

Rule 506(b) allows a limited number of sophisticated non-accredited buyers, with added disclosure. DoorRaise does not offer that route. Talk to your own securities attorney if you want to go that way outside DoorRaise.

Not under Rule 506(b). Posting a live deal to the public, or emailing, messaging or calling people you have no pre-existing substantive relationship with to offer it, is general solicitation. Teaching and talking about real estate in general is different from pitching a specific deal.

How much should I tell friends and family?

Everything that matters, to everyone, in writing. That includes risks, fees, your experience and any conflicts.

What if the deal loses money?

Investors can lose some or all of what they put in. Tell them early what has happened and what you plan to do. Our post on what happens if a syndication loses money covers the steps.

Sources

This article is general information, not legal advice. Talk to a securities attorney about your deal before you offer it to anyone. Every investment can lose money. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.