Real Estate's Crowd Funding Restrictions Lifted

Legal Compliance Resource
September 25, 2013 — 1,032 views  

In real estate jargon, crowd funding simply refers to a mechanism of funding where companies and developers gain their finances through the masses. People themselves book houses and plots of land by which they effectively put down a promise of buying the same land later at its full price when it is fully developed. The benefit the buyer gets is purely financial. Some people use this mechanism as an investment because it basically grants them a booking of a future developed land space at a cheap rate.

This also attracts many buyers because people who do not have large capital may still make the booking since the amount is only a percentage of the final price. They have many years to collect money so that they can buy the land. Quite a few people are also known to auction the land off to other buyers at higher prices.

The benefit that developers get is the extra floating financial capital available during the course of their project. Builders gain returns on investment only years later, when everything is fully developed and bought up. However, there is a large amount of money that goes into the project itself, and this crowd funding eases out the expenses during the course of the investment.

Previous Legislation and Accredited Investors

Earlier, there were certain rules put in by the government pertaining to these crowd funding tactics. Now that these regulations are lifted, real estate is probably going to do better than ever in the case of real estate. The legislations were made for the benefit and protection of the people. Now, however, builders are allowed to advertise their projects to investors who are affluent and interested.

The rule states that such potential investors should have a minimum of two hundred thousand dollars coming in as income per year, or they should have wealth stored in any manner worth a million dollars at least. Allowing this effectively brings in a lot more money not only to the real estate companies but also to the economy itself. Real estate is a sector that has been doing very well for the last few decades. In the recent months, however, it was found that the growth in the industry was gradually reducing.

Refueling the Economy and the Real Estate Industry

This new move by the government should refuel it with its original zest. It is quite likely that there will be a number of added contenders in the business as well, now that laws are a little more lax than before and since they allow certain new perks.

Through this mechanism there is a lot of money that is being given back to the people as well. Since the option is now available to people with lesser incomes, there will be a good number of people who will take place in such a long term investment. People who have provided builders with funds in fact get back a share of the rent that the developer makes when the project is complete.

Legal Compliance Resource