Passed in 2012, the Jumpstart Our Business Startups Acts (JOBS Act) lessened many of the regulations that held investors back from participation in certain investments. The Act was designed to foster small-business capital formation and gave the general public opportunities to participate in funding activities in the early stages of startup and early-stage businesses.
Adopted by the Securities and Exchange Commission (SEC), the Act set the stage for a brand-new industry – real estate crowdfunding. Generally speaking, crowdfunding is a method of raising money by soliciting relatively small investments from a large pool of investors.
Greater Funding Opportunities for Developers
Before the Jumpstart Our Business Startups Act passed, federal regulations forbad the public marketing of private investments. Start-up businesses had to seek funds privately through networking and the development of business relationships with potential investors. In the pre-JOBS Act environment, real estate developers most often solicited investments for real estate projects from a small number of private investors willing to provide large dollar value investments.
With the JOBS Act’s passing, real estate entrepreneurs and technology experts developed crowdfunding platforms, which are now used as an effective mechanism for real estate developers to market their deals to a large population of online real estate investors.
Greater Opportunities for Investors
Before the JOBS Acts, investors had to know someone or be introduced to someone to access certain opportunities. It was also incumbent upon you as an investor to investigate the opportunity thoroughly without having access to certain helpful documents for thorough research before your investment.
Real estate businesses offer platforms through which the average investor can participate in these offerings. Although it is still necessary to perform your research, these platforms make available much detailed information about opportunities, forum conversations, and educational materials about investing in real estate.
Diversification of one’s portfolio of real estate deals was quite challenging before the Jumpstart Our Business Startups Acts passage. Private real estate deals required participants who were able to make a sizable investment. Through crowdfunding, real estate investors can effectively diversify among a wide range of investment opportunities and provide small investments to each.
