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Editor’s Note: Dennis Fassett is a former corporate finance executive turned real estate investing “Cash Flow Mercenary.” Dennis specializes in single-family and multi-family cash flow properties and thoroughly enjoys assisting his fellow investors with their own strategies, including how to buy your first apartment building.
As an ongoing contributor to Mogul’s “Market News Updates,” Mr. Fassett provides us with his own unique, lively, and thought-provoking commentary on the timely industry news and events of today that are impacting our industry. And be sure to check out his other super-helpful Market News Updates. For now, enjoy...
From Dennis Fassett, Cash Flow Mercenary...
Ever since the Jumpstart Our Business Startups (JOBS) Act was signed into law in 2012, there's been a great deal of buzz about Title III, the final provision of the law to be implemented.
This so-called "equity crowdfunding" measure would open new pathways for small businesses (like real estate investors) to raise money from non-accredited investors.
The bill was passed by Congress with the goal of helping to jump start the economy. But the provisions as to exactly how folks like us would actually use crowdfunding to raise money for our deals has been held up by the SEC now for three years.
It’s no secret that the SEC has been dragging its feet and looking for a way to kill this “equity crowdfunding” concept. But, back on on October 30th, the SEC finally approved the final rules for it, signaling that the long wait for equity crowdfunding would soon be over.
Then, there was a big win for entrepreneurs and real estate investors as the (SEC) voted 3-1 for the next step in equity crowdfunding. The approval is a long-awaited ruling that has both experts and consumers talking about the impact it will have on our country’s economy —and the real estate market.
Once the ruling goes into effect, companies can be financed by anyone with the cash to opt in, without undergoing the public registration process. This is a huge move, as it’s the first time in the history of the SEC (that’s 82 years!) that retail investors — otherwise known as your everyday Joes – will be able to invest in private deals.
So how will this impact the real estate market? Below, three industry experts weigh in on what the ruling will mean for our economy, and the $2.5 billion real estate crowdfunding industry.
Scott Picken says…
Scott is the author of Property Going Global and the CEO and founder of Wealth Migrate, the 10th largest global real estate crowdfunding platform. He says:
“I don’t believe there is going to be a catalytic change overnight, but this will have a catalytic affect in the long term. The bottom line is that the wealth gap, the difference between the have’s and the have not’s, is the greatest challenge we have on the planet, and it is only getting worse.
Now with technology and this change in legislation, the bottom 99 percent will have the same access to the same opportunities and partners as the top 1 percent. What most people don’t understand is that this will have a big impact in America, but a far greater impact in the emerging world.
This is going to change the real estate industry forever.”
Marshall Saunders says…
Marshall is the co-founder and managing partner of SaundersDailey, a real estate crowdfunding platform focused on the Midwest. Marshall’s take:
“[The ruling] is not as wide open and accepting of non-accredited investors as I had hoped for. But it’s a start. We will make the best out of the rules and will consider it a toe in the door.
With good results, and consumer demand, we will see that door opening wider and wider in the coming years. The bottom line is that non-accredited investors now have a way of participating in equity crowdfunding. It will change the way America invests, both in business startups and real estate. The wait has been hard, but understandable.
The U.S. Congress has no idea the magnitude of what it was dumping on the SEC when it passed the JOBS Act in 2012. Given that fact, the SEC has done the best that they can to move this forward.”
Doug Ellenoff
Doug is a corporate and securities attorney at Ellenoff Grossman & Schole LLP, and co-founder of iDisclose. Doug says:
“Title III was never intended to have a competitive impact on the established markets. By design it’s intended to enable entrepreneurs and real estate sponsors that have had difficulty raising much-needed capital from traditional channels to be able to do so more efficiently from individual investors, which is precisely what it will facilitate and make a meaningful impact on for those that access this new ecosystem.”
Only time will tell exactly how equity crowdfunding will impact real estate. And we’ll be watching.
Whatcha Say?
How do you feel about this ruling and what these experts have said? Share below.
Dennis Fassett
earned a BS in Economics and followed that up with an MBA in finance. After working and corporate finance and banking for several years, he started buying single family houses, and quickly built a very nice portfolio of cash flowing rentals. When the credit markets started to dry up and he couldn’t get any additional single family mortgages he shifted his focus to apartment buildings. He now has over $3 million in rental real estate. He manages most of it his self and still has a day job. Dennis has even created his own Private Equity fund to buy apartment buildings.