Ever since it became popular, crowdfunding has brought about one of the positive changes to the world of investment. Basically, you no longer need to impress big investors, if the general public likes your project. So, you would bought get funds and feedback, thereby knowing whether your project is worth continuing. Now let us focus on how crowdfunding has influenced the world of real estate and what that means for the future of this industry.  

Old rules for real estate investing

Well as you can image, back in the old days, investing in private real estate was quite tricky. You either knew people who can help you out, or you didn’t; simple as that. In fact, the Securities Act of 1933 did not allow private security investments to be marked publicly. In other words, in order for you to take part in a private deal, you had to know of its existence, and in order to do that, you needed to be connected to the right people.

Furthermore, even if you could track down a private investment, you would need a large sum of money to participate. You’d need a six digit number just to gain access to these exclusive properties, which is quite high for a minimum requirement. Clearly, this was a barricade for any average investor; a privilege only a small percent of people could enjoy.

What changed with crowdfunding

The whole concept of crowdfunding fundamentally alters the previous restrictions. This is beneficial for both investors and the industry itself. You no longer need powerful connections to discover the existence of these deals. The only connection you need is an internet connection. Additionally, you do not need $100,000 to be deemed as an investor. The current threshold is as little as $1,000.

Most importantly, in the October 2015, in Title III of the JOBS Act SEC finally gave the green light for participating in crowdfunding deals to non-accredited investors. For the first time after 80 years, everyone is granted access to the crowdfunding real estate playing field.

The positive impact of the change

Alright, now it’s time to go over some of the positive changes that will result from this so called “liberated market”, if you’ll indulge me the metaphor. Well, for starters, the whole process of real estate investing will be far more transparent. Before crowdfunding, you’d go into a deal knowing very little about the object in question, not to mention how monitoring your investment was an entirely different story on its own.

Crowdfunding is completely opposite of that. As a potential investor, you are entitled to have a detail rich view of your potential purchase. You’ll have online access to your holdings and you will know just how well they are performing at any given time. Moreover, the range of investors will be much wider, and with lower participation standards (as mentioned, $1,000 minimum), the risks are greatly mitigated.

Due to these changes, it should come as no surprise that crowdfunding managed to generate such a high degree of popularity and success.

The only drawback of this entire arrangement, is that it could be harmful for the previously mentioned non-accredited investors. First of all, they lack the disposable income that they can put in as an investment (which can be risky). Second, they may lack the essential knowledge to make an educated guess regarding their possible investment. Sure, we shouldn’t judge the book by its cover, or in this case, a non-accredited trader based on his net-worth, but still, this it is a new territory, therefore tread lightly.            

What to expect

These are all very favorable conditions for the industry’s expansion. Due to this newly emerged hype, more and more crowdfunding platforms will spring into existence, which will result in more competition for the currently active ones. It was also speculated that the crowdfunding industry would reach as high as 3.5 billion dollars in 2016, which only means more good news for the real estate industry.  

To sum up, crowdfunding has successfully leveled the playing field for everyone interested in becoming a real estate investor. However, this only implies that the industry itself will see more profit, but it certainly doesn’t mean that all of the non-accredited investors will reap the benefits of this massive cash flow.