As we noted here earlier this month, the U.S. Securities and Exchange Commission in March approved new rules opening the door for millions more people to invest in real estate. Here’s a bit more detail on the new, so-called Regulation A+ and their potential impact on crowdfunding real estate.
Only accredited investors could invest in offerings (online and off) under the JOBS Act framework. Investors qualify as accredited by earning more than $200,000 a year individually or $300,000 a year jointly, or by having a net worth of more than $1 million.
Reg A+ allows investors who do not qualify as accredited to participate in a wider range of investment opportunities. More specifically, companies can raise up to $50 million per year from non-accredited investors (with some eligibility restrictions based on investors’ income or net worth). This is a huge opportunity both for investment sponsors as well as individual investors who previously have not had access to these investment opportunities.
Issuers had to comply with state-by-state filing requirements, including different state eligibility requirements for investors.
The new rule offers scenarios for pre-empting the individual state requirements. More specifically, some offerings can be filed only with the SEC versus in every state, which is much less burdensome for issuers. The trade-offs for investment sponsors are heightened reporting requirements, audited financials and a higher level of ongoing oversight. For individual investors in real estate crowdfunding, the benefit that accompanies the access to these offerings is increased transparency.
More rules implementing other sections of related federal law are expected soon from regulators… we’ll keep you posted in this space.
At RealCrowd, we want all investors to be able to access high-quality investment property offerings, and participate in suitable investments that match their risk-return profiles.