Small Change was the first real estate crowdfunding platform in the US to use the Reg CF exemption to offer non accredited investors the option to invest in property online. Recently, Small Change has listed their first side-by-side Reg D 506c / Reg CF offering thus leveraging a work around other securities crowdfunding platforms in the early stage space have incorporated.
Under Reg CF, an issuer (including real estate) may raise no more than $1.07 million. This is a subjective amount that has been criticized as far to low to be effective for a wide range of issuers.
Under Reg D 506c (accredited crowdfunding) issuers may raise an unlimited amount of funds. While most online real estate marketplaces have only used Reg D, Small Change has been determined from the beginning to enable access to retail investors (non accredited).
Additionally, Reg CF sets certain parameters as to how much an individual may invest. These parameters apply to both accredited and non-accredited investors alike – another clumsy quirk of the law. The work around is to pair Reg CF with Reg D to create an offer that can raise the money it needs while not curtailing accredited investor participation.
As for the property on Small Change, this offering is for a bed and breakfast in New Orleans. The project is labeled 1476 Magazine Street is seeking just $100,000.
We predict that Small Change will continue to use this side-by-side approach – at least until Congress fixes the shortcomings in Reg CF (and the outdated definition of an accredited investor).
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