With Title III of the JOBS Act is set to take effect next week, the crowd is opining. The legislation intends to bring non-accredited investors into the equity crowdfunding fold and make Title III more workable for real estate; RealtyMogul.com CEO and real estate crowdfunding guru Jilliene Helman believes otherwise. Via email, Helman stated the legislation is effectively useless for certain industries, particularly real estate, given its limitations.
While real estate crowdfunding through platforms like RealtyMogul.com is disrupting the real estate investment landscape, it has largely been limited to high-net-worth individuals and institutions – and Title III falls short of broadening access to retail investors.
According to Helman:
- Title III’s $1 million/year cap puts small business owners at more risk, because restricting their fundraising prevents them from raising the money they need to grow at the times they need it.
- Given its $1 million/year cap, Title III is useless for real estate. Most crowdfunded real estate transactions exceed this amount. A $5 million cap would have been more viable for this space.
- Real estate is an important part of a diversified portfolio, so we need legislation that allows for broader participation while protecting both investors and small businesses
“While Title III does not seem viable for real estate, I do think there is viability in RegA+ and applaud the SEC for their decisions to expand Regulation A.”
There is a bill circulating on Capitol Hill entitled the Fix Crowdfunding Act. As worded now, the bill will enhance investor protection by reworking shortcomings in the existing rules. One of the areas the Bill would address is the funding cap issue. Most industry participants view the bill as common sense legislation that empowers smaller investors but some elected officials have expressed an interest to take a wait and see approach.
Since launching in 2013, RealtyMogul.com counts 77,000 members on board; to date, users have invested more than $196 million in commercial real estate equity and debt. By the end of 2015, RealtyMogul.com crossed the $20 million mark in principal and interest returned to its investors – and that figure continues to grow.