Real estate investors and developers are increasingly looking to raise money for their projects through “crowdfunding,” as legal and regulatory issues become better understood.
In the real estate context, “crowdfunding” is the raising of funds for a project through the use of social media to obtain contributions from many individuals. Technically, each one of these investments in a real estate project by individuals is considered the purchase of a “security” from the project sponsor under federal law and regulations. In the U.S., a project sponsor cannot offer to sell a “security” to the public without either registering the security with the U.S. Securities and Exchange Commission (a time-consuming and expensive process) or qualifying for an exemption from registration. Therefore, the goal of any project sponsor is to structure the investment opportunity so that it qualifies for an exemption.
In the real estate context, there are several different ways of implementing a “crowdfunding” strategy. This article…
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