An SEC 60-day ban on general solicitation of investors will expire early next month. It is the go-ahead that venture capitalists and crowdfunding platforms have been waiting for.
Now they can approach regular investors with opportunities in private equity finance and real estate, a significant change in finance laws that have been in place in the U.S. for 80 years or more.
I just finished the sales copy for a brand new real estate crowdfunding site. They are popping up everywhere.
Here’s another cool thing…
One of the benefits of real estate crowdfunding is that it allows local residents to invest in their community.
According to the New York Times, “Daniel Miller, 25, and his brother Benjamin, 36, are the pioneers behind Fundrise (not my client), a Web platform that lets communities invest in local real estate projects.
“Sons of a prominent developer in the Washington area, the brothers began wondering a few years ago why people in a community, like the transitional H Street NE neighborhood, couldn’t have more of a say in what was being built there.
“They realized that who the investors are and where the money comes from determine what gets built: distant private equity backers who see a deal as simply an investment vehicle tend to put up cookie-cutter projects and strip malls anchored by chain stores — hardly what the community may want or need.”
So now community groups and local organizations can invest in projects in their own area that they never had a say in before.
For example, the NY Time article says, “Mr. Goodman of Third Ward, the co-working and educational space in Bushwick, is a long-term leaseholder who said owning the building through usual lending would require putting 50 percent down in cash — or $7.5 million, an amount out of reach for now.
“Buying it with the help of small investors is “something we’ve started to explore again,” he said. (Its Crown Heights commercial kitchen project opening next year is largely financed by Goldman Sachs.)
“The Third Ward mailing list of 80,000 people, 3,000 members, 15 investors and thousands of students who have taken classes there over the last six years could be a ready investor base.”
And not just places like Crown Heights. How about areas like the Arts District in LA, Cow Hollow in San Francisco, the Meatpacking District in Manhattan or any strong community in your town?
Do you think there are some high-income residents in those areas that would love to put $1k, $10K, $50K, $100K, or $500K into their neighborhood, rather than see another faceless project?
Wave your hands in the air and sing, my friend, because you are correct.
Heck, in Hollywood, local residents are howling about an skyscraper project that was just approved.
Technology and the Internet continue to change the face of commerce in our lifetime.
Real estate crowdfunding is just a sliver of what is to come in this space. Medical is another huge one. There are many more on the way.