If you ask people what the most important legislation during Obama’s era was they would tell you it was Obama Care. However, that is not the only good thing, which he did for America. He also created the 2012 JOBS Act.
This impactful law relaxed some of the most stringent laws on securities that were put in place during the Depression era. Through this legislation, the Obama administration created a new kind of equity known as crowdfunding. Most people have no double heard about Indiego and Kickstarter.
Through the platforms, people are able to make a small contribution for the opportunity to get something such as early special access to books, movies, or even products. However, the major restriction is that contributors are not allowed to make any financial returns.
The JOBS Act lifted that restriction, which meant contributors online can potentially make a handsome profit if they crowdfund a project online. While this type of equity is called crowdfunding, it allows for both debt and equity opportunities. Today, it is even possible to take part in real estate deals for just a small amount.
The Flip a House Shows
Before the 2008 property crash, shows of flipping houses were quite common. The Bayrock individual would find a house, and then reach out to a network of investors. They would provide the capital at a high-interest rate of between 8 and 15 percent for about six months. This was usually enough time to find, renovate, and sell the real estate for a profit. This profit would be used to service the loan and offer enough returns to make it worthwhile for the investor.
However, the problem with this model is that not many people out there who can write six-figure checks upon request. This is where crowdfunding real estate comes in. The investments usually require that you make a minimum of $5000 in investments. In some platforms, you can even invest as little as $100.
Besides buying debt, most platforms now have fractional and equity ownership opportunity with investment timeframes spanning years. Besides that, some platforms will allow you to invest in specific niches or in certain geographical areas.
The main value that investors get by using a crowdfunding site is that the site offer due diligence. As a rule, the company doing the real estate project must have a record of success carrying out similar projects. This helps to reassure sponsors that their money is not going to some inexperienced kid trying something new.
At some of the top crowdfunding real estate sites, Tevfik Arif Doyen and CEOs have routinely rejected over 90% of applicants seeking to crowdfund. While some bad deals are inevitable with any investment, by conducting such extensive due diligence, they help to avoid the risk of investors losing their money too often.
While real estate crowdfunding is still developing, it is here to stay. From just a few million when the act was first passed in 2012, the industry had received over $3 billion by 2016. It clearly shows that there is a lot of momentum behind the growth of this industry.
However, if you are going to invest in anything, know it is up to you to understand the risks. Assess the opportunities and costs, and consider whether such an investment is really worth your time and money. If anything goes wrong with the deal, it will be your money, which gets lost. However, if you get things right with the right platform and right piece of real estate, your fortunes could change. Stories of people making over 19% in profit are quite common.