What Do Crowdfunding and Commercial Real Estate Have in Common?
Don't feel bad if you've heard of crowdfunding, but you're not really sure what it means. Many of us in the throes of balancing careers and families have little time to keep up with all the latest trends. In this article, we'll give you a short definition of crowdfunding and explain its potential in the Texas commercial real estate market.
What is crowdfunding?
Crowdfunding, according to a Forbes article, is the practice of “funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet.” Examples of online crowdfunding platforms include Kickstarter, Indiegogo, RocketHub and Onevest.
The way these platforms generally work is inventors and visionaries create project profiles, which are essentially sales pitches composed of visual and written information about the project.
Many projects offer rewards for various contribution levels, usually related to the purpose of the project. For example, a group of musicians might start a campaign to raise money to record their first album. They could offer rewards for contributions, such as pre-release copies of the album, poster signed by the band or other premiums related to the project.
Does crowdfunding violate any financial regulations?
That depends on who you ask. Crowdfunding is still a developing concept. The U.S. Securities and Exchange Commission (SEC) has made some recommendations, but individual states vary in their attitudes toward crowdfunding and the need to regulate instrastate transactions.
For Texas's part, the Texas State Securities Board recently approved rules for crowdfunding between Texans. Those rules will allow small investors to buy shares in private projects and business startups through intrastate crowdfunding portals available only to Texas residents and Texas businesses.
What's on the horizon for the commercial real estate market in Texas?
For one thing, the new crowdfunding rules in Texas are expected to change the landscape of the Texas commercial real estate market. A wave of relatively small investors, who on their own don't have the capital to enter the market, can buy shares in private startups whose business is to buy, sell and lease commercial real estate.
Of course, the old cautionary statement – buyer beware – is no less applicable in a crowdfunding situation than in the traditional marketplace. If a deal sounds too good to be true, it probably is. The best way to mitigate risk and avoid legal pitfalls is to consult with an experienced business and real estate litigation attorney before you put your money on the line.
Call today for an appointment
Before you finalize your business plans or transfer assets to a new investment group, consult with the skilled business and real estate litigation attorneys at Peterson Law Group. Our Bryan-College Station, Texas attorneys review the law as it applies to your situation and provide advice to help you reach your goals. Call Peterson Law Group today at 979-703-7014 or fill out our online contact form.