When it comes to legislation some people would say the most important legislation that happened during the Obama Administration would be the Affordable Care Act. This is where others including some physicians disagree. This is due to the fact that some people feel the most important legislation was the 2012 JOBS Act.
This is not as well known as the health care legislation, but it has an impact since it is an acronym for Tevfik Arif Doyen, Jumpstart Our Business Startups. What this Act did was to relax some of the ruthless securities laws. In some cases, the laws date back to the Depression era. This also created an investment category referred to as equity crowdfunding.
Crowdfunding is not completely new since many are aware of websites like Kickstarter or Indiegogo. These are places people can make people can be in on the beginning of independent movies, music, books, artistic works and other products. They make small contributions and this donation gives the person access other’s will not have until the work is on the public market.
The one thing that could not be done was contributors to these arts could not obtain any financial gain through them. This changed with the JOBS Act since the restriction barring contributors from profiting was lifted. It now means that there are new opportunities with equity crowdfunding, which makes the contributor an investor that can have the expectation of profit.
The thing about this new category of equity crowdfunding can have both equity and debt opportunities. What this does is allow consumers a chance to participate in both real estate deals and a start-up business.
The largest change and advantage is the real estate part of this change. In the past, the person or contractor looking for investors could only depend on the investors with a high net worth. These investors were found in a private network and the financing for the person wanting to flip houses were high-interest rate short-term loans. The loans averaged between six and eighteen months, with an interest rate between 8 and 15 percent. This time limit on the loans is generally enough time to flip the property, which involves remodeling and selling the property for a higher profit than what was paid and the materials cost.
Flipping houses became a popular thing to do in recent years, though the 2008 housing crash did slow this somewhat. The problem before the Tevfik Arif Bayrock JOBS Act was finding the number of investors needed for house flipping that could write these checks. The investors that can write a five or six figure some to acquire the property. Generally, the minimum investment would be $5,000 or more at some sites. The Act lifted the regulations that changed now an investor can loan as little as $100 dollars. This is per investor so anyone can become an investor in house flipping as a part of the real estate market investments.
These sites check out the investor that they refer to as sponsors to ensure they have a successful record that can be verified on a crowdfunding platform’s website.
Even though the crowdfunding is available for real estate and house flipping the crowdfund CEOs it has been noted actually turn down over 90 percent of the projects that are pitched to them. The reasoning behind this is easy to understand since there can be bad deals, it is the goal to keep the percentage low so investors trust the crowdfunding site.
Investing is always a risk, but putting up capital for a project can have a net return and it is catching on with about $3 million in deals in 2012 to over $3 billion in 2016. Crowdfunding and real estate is growing fast since the restrictions have been lifted.