How to Raise Capital for an Apartment Syndication Without Breaking SEC Rules

Raising capital is one of the most critical—and regulated—parts of putting together an apartment syndication deal. As exciting as it is to bring investors into a deal, it’s essential to do it the right way to avoid violating securities laws. The Securities and Exchange Commission (SEC) has strict guidelines around how and from whom you can raise funds, and getting it wrong can have serious consequences.

Here’s a clear breakdown of how to raise capital for your apartment syndication without breaking SEC rules.

1. Understand You’re Selling a Security

First things first: when you raise money for a syndication, you’re not just raising capital—you’re selling a security. That means you’re subject to federal securities laws, and you need to structure your offering accordingly.

Most apartment syndications rely on exemptions under Regulation D, specifically Rule 506(b) or 506(c).

2. Know the Difference Between 506(b) and 506(c)

Here’s a quick breakdown:

Rule 506(b):

• You can raise from an unlimited number of accredited investors and up to 35 non-accredited but sophisticated investors.

• No public advertising or solicitation allowed.

• You must have a pre-existing, substantive relationship with your investors before offering them the deal.

Rule 506(c):

• You can publicly advertise your offering.

• All investors must be accredited (and their status must be verified).

• No need for a pre-existing relationship.

Choosing the right exemption determines how you can market your deal and who you can accept capital from.

3. Never “Co-Raise” Capital Without Proper Structuring

A common mistake among newer GPs is recruiting others to help “raise money” for a deal. The SEC calls this "selling away"—and it’s illegal unless those individuals are registered broker-dealers or appropriately structured as co-managers or members of the GP entity who provide legitimate, active services in the deal.

Bottom line: if someone is helping you raise capital, they need to be integrated into the GP team and contribute meaningfully (not just bring in investors).

4. Use a Proper PPM (Private Placement Memorandum)

A PPM is a legal document that outlines all material details, risks, and terms of the investment. It protects you and informs your investors. If you’re raising capital—even from friends and family—you should have a PPM drafted by a qualified securities attorney.

5. Document Your Relationships and Compliance

Especially under 506(b), you must show that you had a pre-existing, substantive relationship with investors before sharing the opportunity. Keep records of communications, meetings, and interactions that show how that relationship was formed and developed.

If you’re doing a 506(c) raise, make sure to verify accredited investor status through third-party verification or adequate documentation.

6. Educate, Don’t Sell (at First)

When meeting new potential investors, don’t pitch them a deal on day one. Focus on building a relationship and educating them about multifamily investing. Once you’ve established a legitimate relationship (and you're doing a 506(b) raise), you can share opportunities.

7. Work With a Securities Attorney

If you’re raising capital, don’t wing it. A good real estate attorney who specializes in securities law will help you stay compliant and structure your offering correctly. The cost is minor compared to the risk of noncompliance.

Final Thoughts

Raising capital for apartment syndications is a powerful way to scale—but it comes with responsibility. The SEC doesn’t expect you to be perfect, but it does expect you to understand and follow the rules.

Stay compliant, protect your investors, and build a business that lasts.