Crowdfunding has become a popular way for entrepreneurs to find money for startup businesses or other projects. Organizations can use an online social fundraising platform like Kickstarter to pitch their ideas for a new business or art project and collect donations from individual contributors who want to support the idea. For example Butter Bakery in Minneapolis recently raised $16,800 to purchase equipment and furniture to aid their move to a new location.
Now, changes in SEC regulations resulting from the JOBS Act could bring crowdfunding to real estate investing. Previous regulations limited investing in closely-held real estate ventures to accredited investors, which for individuals requires either net worth of at least $1 million or annual income of at least $2,000. The JOBS Act eased those restrictions, allowing easier direct investment by non-accredited individual investors in commercial real estate ventures.
A few start-up companies are already getting the ball rolling. Realty Mogul recently launched a $500,000 seed-round. The product of a Microsoft tech start-up incubator, Realty Mogul is based in Seattle and will be offering real estate investment opportunities in Washington and California. The company is currently focusing on accredited investors while waiting for the SEC to determine the final regulations resulting from the JOBS Act, at which point it may open up investing to non-accredited individuals.
Fundrise is another start-up which has gotten off the ground recently. The company is focusing on urban retail projects in Washington D.C. and is touting crowdfunding as an opportunity for people to invest in the neighborhoods they live in while avoiding some of the costs and barriers to entry associated with traditional real estate investing.
Prodigy Network is one of the most prominent crowdfunding investment platforms for U.S. real estate, but it isn’t actually available to U.S. investors yet. The company allows individuals to invest in real estate in the United States and Latin America, and is waiting for the SEC to clarify regulations before opening up to American investors. Its portfolio includes the BD Bacata luxury hotel in Bogota, Columbia, which will become the first crowd-funded skyscraper in the world and the second-tallest building in Latin America.
To our knowledge, there are no crowdfunded real estate investment platforms currently operating in Minnesota, but that likely won’t be the case for long. As Prodigy Network CEO Rodrigo Nino has declared, it appears that “future of investing in real estate is here.”