In the past, raising cash to finance a real estate deal was often a three part process due to the rules and regulations in the real estate market. Since the rules prohibited publicly marketing any private real estate deals, investors were limited to asking only those people with whom they already had a relationship, such as family and friends.
Investors could certainly make more friends at networking and business groups but before you could talk about your real estate deal, you had to form that relationship first, which can often take months. And what if your family and friends aren’t interested in investing in real estate or they simply don’t have any capital to invest in multiple deals? Investors were very limited in their resources.
However, Congress passed the JOBS Act in April 2012 which requires the SEC to allow public marketing of private real estate deals, basically putting the small investors on an even playing ground with the larger investment companies with huge cash reserves.
No longer do you have to have a pre-existing relationship with someone before you can pitch your deal. Any one, even non-accredited investors can learn about private deals and actively invest without penalty.
Of course, there will still be certain challenges, such as ways of finding out about all these deals since smaller companies likely can’t afford to hire staff members to do this research. But no doubt there are resources in the works to solve this problem.
What are your thoughts on the JOBS Act? Will it help or hurt business for real estate investors? Leave your comment below.