In 2013 the various components necessary for implementation of Title III of the JOBS Act were set in place when the Securities and Exchange Commission released rules for business start-ups and a unique form of equity-based investing called Crowdfunding. Now crowdfunding is being used for real estate investments. Given that crowdfunding is still in its proverbial infancy, it may be in your best interests to consult with a College Station real estate attorney if you are considering investing in this manner.
What Is Crowdfunding?
As new a concept as it is to real estate, crowdfunding actually has ancient origins, dating back to 3,000 B.C. The concept is fairly simple, though its application can be quite complicated. In essence, the idea is to fund real estate ventures through the use of the crowd. Rather than a few powerful and wealthy companies investing large sums into a given real estate development project, the opportunity is given to very small investors to provide capital in exchange for equity ownership.
Therefore, if persons invest, say, $2,000 in a business start-up, they become small percentage owners in the company. While their share in the business is not significant enough to carry much weight for the purposes of shareholder decisions, they enjoy a potentially significant profit. The business benefits from gaining the equity necessary for its start-up, but also does not risk losing majority shareholder status.
Crowdfunding in Real Estate Investing
As mentioned, crowdfunding is now being utilized to fund new real estate projects. Companies are even setting up Internet portals that link real estate developers and small investors. An investor can thereby register, and then “shop” via the portal for real estate investment opportunities. This new program is designed not only for large-scale real estate projects, but also for much smaller ones—even single family homes. An individual with only a few thousand dollars can through crowdfunding become a real estate investor.
While the notion of creating a means through which average income persons have an opportunity to become investors is a noble one, it is important for those who are interested to be cautious. While many companies are above-board, any time an investment scheme is developed scam artists try to take advantage of the unwary.
For Further Information
If you are planning to invest money in a real estate project it is important that you work with a knowledgeable College Station real estate attorney. Call Peterson Law Group today at 979-703-7014 or 936-337-4681.