Real Estate Crowd Funding Is Not Allowed By Law?
Is real estate crowd funding allowed in the U.S? Can its own citizens invest in it? How about in other parts of the world, is it allowed by their law too?
Know that not all countries where there are funding platforms that exist allow real estate crowd funding. This has something to do with their ruling on equity based crowd sourcing of funds. Countries that do not allow small scale investors to invest in equity does not allow real estate crowd funding.
Why is this? Well, investment in real estate crowd funding allows anyone to own shares of stakes in a real estate business for a few thousand dollars/Euros. This would mean that small scale aspiring entrepreneurs can have the chance to own shares in real estate business.
Now for countries which only allows duly recognized entrepreneurs to own shares of stakes in a business, real estate crowd funding may not be legal. In short, their law only allows those licensed entrepreneurs/parties to own such shares of ownership. This ruling goes the same for real estate crowd funding ventures.
Does it pay to know first the crowd funding law before any equity venture? Absolutely, it does pay to do so. Small or big, every penny counts as it is a hard earned money. Real estate crowd funding seems lucrative, but if it is not legal in a country it will get you in trouble. Not only that, you will lose your money too. To help, do check out the post entitled “Crowd Funding Law – Important To Know?”
But even though real estate crowd funding may be allowed by law, it still pays to know the rules. One example is the of the U.S regarding it. Some would say it is legal, while others would say it is not allowed in the land.
Is Real Estate Crowd Funding Allowed In The U.S?
Before the JOBS act was signed by Pres. Obama in April 2012, equity crowd funding has not been allowed all throughout the country. It only allows duly recognized or licensed investors to invest in such venture under Regulation D of the 1993 Securities Act. This means that small scale investors cannot invest small dollar amounts in exchange for a share of ownership in a business including real estate.
In short, real estate crowd funding was not then allowed in the said country. But with the approval of the JOBS act in April of last year, it lifted such restriction. They said the country is now allowing non-licensed, that is small scale investors to own stakes in any business including real estate. This is in line with Regulation A exempt.
In other words, anyone in the said nation has now the chance to own stakes in a business for as low as $2,000 in a year. Or if not, 5% of their total net worth/income in commercial real estate ventures.
So, Does It Mean That Real Estate Crowd Funding Is Allowed Anywhere In The U.S?
Before the JOBS act, the law requires that investors must come from the the same state as that of the equity business offering. With the JOBS act signed into law, interested parties from any state can now invest in equity or real estate crowd funding.
However, even though the act was already signed into law, it is said not yet fully implemented. This has something to do with the Commission working on the rules that protects the welfare of investors.
Is Real Estate Crowd Funding Allowed In Europe And Asia?
Most often the countries where it allows small scale non-license investors to own stakes in a business also allow real estate crowd funding. Not unless there is a special rule that does not allow such investors to engage in one.
In countries where equity crowd funding is allowed by law such as the following UK, Netherlands, Sweden, France and other real estate crowd funding is legal. In Asia such as Hongkong it allows equity based funding. Thus, make it safe to say that owning a stake in real estate business is also legal.
However, it is still safe to check first the equity funding law of the country you are eyeing at. For more information check out our previous post entitled “Crowdfunding In Different Countries – Is It Legal Or Not?”. It will help shed light on which countries real estate crowd funding would be most likely allowed by law.
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