A Guide to Crowdfunding in the Real-Estate Sector

By Ruth Simon and Eliot Brown Why is there a lot of new buzz around crowdfunding?

For years, entrepreneurs have been using the Internet’s power to reach out to people for contributions to back new projects and companies. But until recently, they have offered rewards such as T-shirts or coffee mugs.


What’s different now?

In 2012, Congress and President Obama approved the Jumpstart Our Business Startups Act, which reduced the restrictions on online fundraising. Parts of that law are being implemented now, sparking the creation of numerous “equity” crowdfunding sites aimed at investors.

How do crowdfunding real-estate sites make money?

It varies. Many sites make money on fees by providing a marketplace where investors and property owners meet. Some sites take an ownership stake in properties, meaning they receive a share of the profits.

What kinds of properties can I find on these sites?

The offerings vary widely from distressed mortgages to ground-up development.

What are the risks?

Sites vary when it comes to how much due diligence they do before listing a project. Investors can lose some or even all of their money if the property runs into problems. There also is a chance that the site itself could fail, without ample protections.

Does this mean I can invest in a wide range of properties with the click of a mouse?

It is more complicated than that. Many restrictions still apply to entrepreneurs trying to raise money online. And different firms mean different things when they say they are engaging in crowdfunding.

So who are crowdfunding sites targeting?

Many of the sites are seeking investments from wealthy individuals known as “accredited investors,” generally those with an annual income exceeding $200,000 or a net worth, excluding their primary residence, above $1 million.

Can ordinary investors participate in these types of deals as well?

It depends. Twelve states have passed legislation or adopted rules allowing entrepreneurs who live in the state to raise funds from local residents. The Securities and Exchange Commission currently is working on rules required by the JOBS Act aimed at small firms and startups that would allow private firms to raise money from everyday investors.

Are there other ways these firms are raising money?

Some of them also are taking advantage of long-standing rules that allow firms to raise up to $5 million over a 12-month period from ordinary investors, provided they meet certain requirements.

—Ruth Simon and Eliot Brown
Source !=


ForbesHow Crowdfunding Can Supercharge Your Campaign In 2016ForbesThey say that there are about 7.45 billion people living in this world right now. Imagine that if you could get each of these seven-and-a-half billion people to contribute one cent to your project, well, you know what I [...]

How Crowdfunding Has Changed the Startup GameSingularity HubCrowdfunding has become a multi-billion-dollar industry, funneling millions of dollars into thousands of projects. Technology in particular is one of the leading categories on popular fundraising platforms like Kickstarter an [...]

The GuardianCrowdfunding: the new buzzword for academics needing research moneyThe GuardianArchaeologist Dr David Petts, from Durham University, has also used crowdfunding, raising almost £25,000 to fund a project on Lindisfarne, off the Northumberland coast. The dig, in June, led to [...]

Crowdfund InsiderWhen It Comes to Retail Crowdfunding, SAFEty FirstCrowdfund InsiderOn September 22nd, Crowdfund Insider published a post summarizing the arguments presented in our new essay entitled “Crowdfunding and the Not-So-Safe SAFE“ (forthcoming in Virginia Law Review Online). [...]

CNNMoneyDorothy's fading red slippers saved by $300000 in crowdfundingCNNMoneyThe ruby red slippers worn by Judy Garland in the beloved 1939 film "The Wizard of Oz" are set to undergo a major conservation effort following a successful crowdfunding campaign. The Smithson [...]

Airbitz, BitPay, and Wefunder leverage bitcoin and new US ...Brave New CoinEquity crowdfunding platform, Wefunder, recently started accepting bitcoin. On the same day, popular bitcoin mobile wallet provider Airbitz announced the ...and more » [...]

BloombergCouples Desperate For Children Turn to Crowdfunding FertilityBloombergCrowdfunding has become a popular mechanism for many couples who can't afford the high costs of IVF, or adoption and surrogacy. “It's not an easy thing to share publicly,” says Crystal Barrett, 33 [...]

Equities.comEntrepreneurship in the Crowdfunding EraEquities.comBrandon Adams & Greg Rollett are the co-hosts of Ambitious Adventures: Reality TV for Young Entrepreneurs, so they've learned a thing or two about how to start a business. Here, Rollett and Adams talk entrepreneu [...]

Kiplinger Personal FinanceRaise Money for Personal Bills on Crowdfunding SitesKiplinger Personal FinanceWhile crowdfunding is often associated with business start-ups, many people are finding it a fruitful way to raise money for personal needs. Sites such as YouCaring, GoGetFunding, G [...]

AZCentral.comTiny companies lure investors under Arizona crowdfunding lawAZCentral.comInvestors who make bets under the state's one-year-old crowdfunding law certainly have the potential to get in on the ground floor, but they must be patient and might not receive any returns. Th [...]

CFB Finance

Press Release

Live Crowdfunding .tv

What's Next Step in Regulation A+ JOBS ACTS Title IIII :L Interview : Steve Cinelli with Brian Korn Securities and Crowdfunding/Peer-to-Peer Lending Lawyer, Watch more video library | Conference | Interview | Campaign Showcase | Research | Education |