There are many ways in which Title III of the JOBS Act creates freedom for investors. Through changes in the market, added liquidity, and behavioral transformations, the average investor has the opportunity to invest in any real estate investment.
A firm’s involvement can also provide a new level of flexibility and liquidity. This will have a major impact in the market. Thus, creating an opportunity for an entirely new market of buying and selling partial ownership of real estate.
Market Shift: Cause & Effect
Crowdfunding has established itself and many argue it will further establish itself as the new standard. This is especially true for early startups and financing for businesses.
Some estimates give Crowdfunding a potential valuation of $300 Billion of market capital. This capital influx could create major implications for the real estate industry.
- It will create a new investor class (unaccredited investors will begin to shift away from only “friends and family” investing).
- People will be able to take part in the greater purpose, physical aspect, and creative display of each investment.
- It also creates an Economic helping hand encouraging entrepreneurs and startup financing.
There is even a possibility of scalability if it is done correctly.
Title III allows for increased liquidity in an industry that is inherently illiquid. Investors now have more options for diversification, allowing the investor to spread their capital across multiple assets.
As a result, it allows for the investment portal to create a larger pipeline for investors to have more investment options. Even more so, it provides the opportunity to be a part of a growing company.
Behavioral & Cultural Shift
Title III will impact society in a way that will shift the way people invest. In fact, they are categorizing this as FINTECH.
Before real estate Crowdfunding, the looming issue for investors was finding the right property to invest in. Before, this could take browsing countless properties with an abundance of legal fees. With Crowdfunding, it’s as simple as browsing a company’s investment portal that has already laid out thoroughly-vetted investments negating potential legal fees.
However, in the niche of Real Estate, timing and a firm’s ongoing track record are key factors in creating success and confidence for the investor. In other words, it is all about the portal, how seasoned they are, how they adapt in an ever changing market and what type of financing they provide. Therefore, you must be able to trust your portal. After all, the portal vets investments so you can make an informed decision on where to place your money.
Like the internet democratized popular opinion, Title III will further democratize the way we find, choose, invest, and manage investments.
In conclusion, Title III will give those who do not have the financial means and education the ability to invest a small portion of money. There are still regulations, however, to ensure that the average investor doesn’t get out of control. Under Title III, investors with an income below $100K, the ceiling is $2K or 5% of income or net worth. For those with an income over $100K, the maximum is 10% of income or net worth.
Yet, the regulatory drawback for companies is that they are limited to raising up to 1M per year under Title III. However, this is also a positive because it increases liquidity for the investor while providing a safety net in which they can fall back on.