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Using crowdfunding for commercial real estate investments

On Behalf of | Mar 25, 2016 | Commercial Real Estate |

These days, institutional investors in California and around the country are holding a large portion of their portfolios in commercial real estate. Commercial properties can make excellent investments as they can generate income while they are being held and then be sold after they have appreciated in value. Until recently, it was relatively difficult for individual investors to invest in these types of projects, however.

Commercial real estate has been an exclusive market for a long time because it requires a large initial investment. However, real estate crowdfunding resulting from the passage by Congress of the JOBS Act in 2012 has opened up the commercial real estate market to individuals who may have just a few thousand dollars , to invest. Using online crowdfunding platforms, a small investor can purchase a share in a commercial property and then receive dividends when the property earns income.

Real estate crowdfunding has potential benefits for developers as well. With credit in general tightening and more restrictions placed on commercial bank lending practices, it can open up a new market for capital.

Though real estate crowdfunding may open up commercial real estate investing to casual investors, commercial real estate remains a complex marketplace. Before investing in a commercial real estate opportunity, an investor may want to go over the details of the transaction with an attorney, including a review of all pertinent documentation. Developers who want to use this type of platform as a source of funding for their projects may want to have the assistance of an attorney as well, since there are federal and state law restrictions that apply.