Crowdfunding Gives Rise to a New Era of Real Estate Investing
In the past, real estate investing was a game that relied primarily on who you knew. Because of the Securities Act of 1933, private real estate investors could not legally market properties to the public. Consequently, only investors with elite connections could learn about lucrative real estate opportunities. Furthermore, once an investor learned about an offering, the buy-in requirement was often in the six-figure range. This meant that you needed to have exclusive financial connections to acquire investment capital.
That was how it used to be, but now things have changed. In 2012, the Jumpstart Our Business Startups (JOBS) Act was signed by President Barack Obama. Title II of this new law eliminated previous restrictions on general solicitation of private investment opportunities. This has allowed small real estate firms to advertise and raise capital in a variety of ways, including via the Internet.
What is crowdfunding? Any type of fundraising that reaches out to a large number of people could be considered crowdfunding, but the term mostly refers to websites, such as CrowdStreet and iFunding, and other Internet-based platforms that allow large numbers of users to participate in funding projects.
Crowdfunding has recently become a new buzzword among real estate investors. It’s still very new, but crowdfunding has already had a big impact on the industry. In 2015, hundreds of millions of dollars were raised through real estate crowdfunding. Not only are real estate investments accessible to nearly anyone, but it often requires as little as $1000 to participate in a real estate crowdfunding project.
Today, real estate investing no longer follows the old country club model of networking for opportunities and tapping elite financial connections. Now it only requires a laptop or tablet and a trivial amount of cash to become a real estate investor. Overall, these changes have had a positive effect on the real estate industry, including greater transparency and accessibility for investors and more efficient access to capital for real estate companies.
For more information about crowdfunding, or to learn about the real estate investment opportunities that we offer in California, please contact us.