How Title III of the JOBS Act helped Fundrise 'democratize real estate' - Technical.ly DC

Growth

Oct. 24, 2016 7:50 am

How Title III of the JOBS Act helped Fundrise ‘democratize real estate’

Plus, some thoughts on the limitations of the current regulation.
D.C. real estate.

D.C. real estate.

(Photo by Flickr user Sonara Arnav, used under a Creative Commons license)

When Dupont-based Fundrise first launched in 2012, the company’s mission was to “democratize” real estate investing — to “give everyone the opportunity to invest directly in high quality real estate.”

The company’s tech-driven model allowed for a significant departure from the old school methods of real estate investing, but there was a rub — Fundrise’s democracy had imposed legal limits. That’s because, back in 2012, Fundrise couldn’t actually give “everyone” the same investment opportunity. Under the SEC rules of the time, any individual investing with Fundrise needed to be an “accredited investor” — an individual with a net worth of $1 million or $200,000 in annual income. That’s a pretty limited democracy.

But even back in 2012 this was starting to change. That year President Barack Obama signed the JOBS Act, Title III of which opens up equity crowdfunding to non-accredited investors. And finally, on May 16, 2016, that section of the Act was implemented by the SEC. “We’ve been really excited about it,” Kendall Davis, investment associate at Fundrise, told Technical.ly.

And no wonder — Title III vastly expands the number of potential investors that Fundrise has access to, and throws some legitimacy behind their mission to serve “everyone.” Anyone who is a U.S. resident over the age of 18 can invest via Fundrise for as little as $1,000. There are over 100,000 users on the site, Davis said.

There are still some limitations, though. For example, each Real Estate Investment Trust (REIT or eREIT as Fundrise calls them) that the company sets up has a $50 million cap. According to Davis, demand is much higher than this. Fundrise has chosen to get around this by increasing the number of eREITs they have available — launching five different options since November 2015.

The new regulations also mean more SEC paperwork, which translates to higher legal costs. But overall, Davis said, “this is certainly a step forward.”

Companies: Fundrise
People: Barack Obama
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