What is private real estate investing? And what makes it public? Private real estate investing or private lending is an iron-clad industry that has historically only been open to the wealthiest 3%. Thanks to new rules implemented by the Securities and Exchange Commission around Title III and Title IV of the 2012 JOBS Act, the public at large can access investment products that have previously only been available to a select few.
Antiquated Regulation
The Securities Act of 1933 still largely regulates the sale of securities. This was the first major federal legislation around the offer and sale of securities to individuals. The nearly hundred-year-old Act remains the foundation and guiding legalese for disclosure and filings around securities. Much of what is included in the Act was written so as to protect the individual investor. However, when interpreted today, the protections seem antiquated and out of line with modern finance.
Disrupting Regulation
The disruptive nature of the Internet doesn’t stop short of finance and securities. With more information than ever before available in a few clicks, self-directed investors are hungry for alternative ways to earn more with their money. Using technology and Regulation A+ (under Title IV of the 2012 JOBS Act), Groundfloor opened up access to short-term, high-yield investment opportunities yielding returns of 7% to 26%. That’s 10X more than stashing cash in a savings account, CD, or other short-term financial product.
Big Banks
Prior to the recent implementation of rules for crowdfunding under Title III and Title IV, only accredited investors or institutional capital like funds or big banks had access to investments with the most favorable returns.They could chip in the large amounts of cash and earn outsized returns. However, the persuasion of one institution or a small group of wealthy investors is inherently volatile; and has potential for far-reaching negative effects. Think back to the Great Recession, caused in part by over-reliance on big banks and institutional capital.
Broadest Base of Capital
You are the counterbalance. Thousands of Internet lenders are changing finance, investing in fractionalized increments using platforms like Groundfloor where the minimum investment is $10. When small businesses and entrepreneurs are funded by a broader base of capital, it creates a more stable and reliable environment where everybody wins. It’s less expensive for borrowers and the rewards are greater for investors.
The Wolf of Wall Street
Trusting the knowledge of a few or the trends of a market isn’t aligned with the principles of modern finance where everyone can choose their own risk and reward. Why let Wall Street manage your money for you and take a cut of your earnings?
The Wisdom of the Crowd
When you join thousands of investors funding loans on Groundfloor, you’re using the wisdom of the crowd to make investment decisions aligned with your investment strategy and risk tolerance. It’s a new way of finance - transparent and efficient - contrary to archaic traditions that preclude most of us from earning more with our money.
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