Real Estate Crowdfunding – Emerging Opportunity or a New Trap For Individual Investors?

real estate crowdfundingThe US commercial real estate market is an $11 trillion dollar. There is no surprise it attracts thousands of investors. But historically, financial barriers to entrée have been very high, making it impossible for an average Joe to enjoy the rates of return available for hedge funds and wealthy families. Recent changes in securities laws have changed the situation.


The JOBS Act signed by the President Obama in April, 2012 has freed entrepreneurs, including real estate developers, from certain restrictions allowing them to solicit and raise capital in small amounts from a broad number of individuals. The SEC is still working on finalizing the new rules of the game. This fall we saw two major legal developments: in September, an 80 year-long ban on general solicitation was removed, allowing entrepreneurs openly promote their fundraising efforts. Then in October the SEC voted on the rules for crowdfunding to allow non-accredited investors to participate.

All of this has stimulated the emergence of real estate crowdfunding portals. In 2013 we have witnessed the creation of more than ten websites devoted to promotion of the new vehicle which offers portfolio diversification and access to commercial real estate deals for individual investors as well as project financing for real estate developers.

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