A recent change in the regulations of the Security & Exchange Commission may mean changes in small-scale real estate development. Combined with the reach of the Internet, it may mean more investors for more developers and ownership.
Briefly, prior to the July 10 2013 change, the SEC required those seeking investors to surpass very high standards of reporting in order to advertise for investors. Investors had to be close associates. Now, however, a real estate developer or a syndicate can make a plain-English appeal for funds to the general public.
The Internet brings a second element: crowd-funding. A Web presence, for instance "Fundrise", can reach numerous candidates easily and cheaply. A person in New York can invest in an apartment complex in Palm Springs.
It might go like this: an apartment building is found, but the experienced purchaser lacks all the down payment. He/she advertises on a crowd-funding site, producing a prospectus, a management team, financing, and supporting oversight experts (accountant, attorney, inspector). Moneys collected go into escrow, the deal closes, and reporting is done at agreeable intervals. At some time in the future, the property is sold and moneys distributed to investors.
I've had a little experience with real estate development partnerships. Investors should be careful to know the people they invest with, and exercise good oversight over management of the developments. It will be interesting to watch how the changes affect real estate in the future.
Here is the SEC announcement:
SEC removes prohibition on advertising for investors
A discussion is here:
http://astudentoftherealestategame.com/
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