What is crowdfunding?
Crowdfunding lets small-time investors fund big projects.

Crowdfunding (or equity crowdsourcing) is a new concept. What is it?

The Jumpstart Our Business Startups Act went into effect in May, 2016 and, for the very first time, allows “non-accredited” investors to back private companies. Before that, to invest in private companies, investors needed to be “accredited,” meaning they needed to have at least a $1 million net worth or have earned at least $200,000 for at least two years. (Editor’s note: Realtyshares still requires investors to be accredited.)

In the planning stages for the better part of four years—ever since President Obama signed the JOBS Act in 2012—crowdfunding awaited the green light from government regulators. Now that it’s a go, the investment channel provides an accessible mode for individuals interested in putting real estate in their portfolio—and, boosters say, reaping returns that can surpass 10 percent annually.

“At a time when the stock market has been particularly volatile and where yield is hard to find because of low interest rates, real estate is a sector where you can find relative stability and strong performance,” says Charles Clinton, CEO of EquityMultiple, an online real estate investment platform based in New York City.

Yet even Clinton acknowledges, so far as the JOBS Act and real estate go, that “the industry frankly isn’t old enough to have much statistical evidence in one direction or another.”

And therein lies the rub—and a big one.

 

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