It probably would have happened faster if it hadn’t been for federal SEC regulation which forbid non-accredited investors from contributing capital to large scale projects such as real estate investment. The idea behind the regulations was to protect average people from being swindled by scam artists looking to take a quick buck from an unsuspecting small time investor. “Accredited Investors” are generally required to make $200,000 or more per year, the thinking being that the damage won’t be as detrimental for them if the deal does go south.
While well intentioned, the SEC regulations didn’t account for crowdfunding or microfinancing and have actually slowed down entry into real estate and other small scale microfinancing projects. In 2012, the JOBS Act modified some of the rules regarding the methods capital firms can use to acquire investment. Enter real estate crowdfunding.
It’s an exciting time for micro-investors who want to try their hand at real estate investment, but just because SEC regulation has been rolled back does not mean the risks have. David Manshoory, the founder of a high profile real estate crowdfunding platform known as AssetAvenue warns that potential investors are not off the hook for doing their homework just because the project is crowdfunded.
So how can the average person make sure the real estate project they’re contributing to is the real deal?