Changes to U.S. securities laws that are intended to help startup companies raise much-needed capital will give individuals the opportunity to invest in commercial real estate. The Jumpstart Our Business Startups (JOBS) Act loosen restrictions on investments in closely held companies by people earning less than $200,000 per year and whose net worth is less than $1 million.
Before the legislation was passed, companies could only sell shares to people whose personal profile exceeded these levels. Investment opportunities were available to these “accredited investors” only.
The new law will allow non-accredited investors to put $2,000 per year or five percent of their income or net worth, whichever amount is greater, into closely held ventures if they wish. The legislation officially came into effect in April of 2012 but commercial property investors have not been able to start putting their money into offices and shopping malls yet. The Securities Exchange Commission (SEC) is still working on rules designed to protect investors.
Fundrise LLC recently raised $325,000 from 175 investors, which gave them a 28 per cent stake in a two-story building the firm bought in Washington, D.C.
Whereas it took Fundrise nine months to get its first offering qualified with the SEC, under the JOBS Act the process will be much faster. Company co-founder Ben Miller stated recently that the new law would mean getting qualified should take as little as a day under the new rules.
Under the JOBS Act, companies like Fundrise will be free to solicit funding from non-accredited investors across the U.S. At present, the company only seeks contributions from this category of investors if they live in the state where the offer is registered. When the rules are in place, the doors will be open to sell equity to investors nationwide.
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