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Crowdfunding and Commercial Real Estate Investments Image

Crowdfunding and Commercial Real Estate Investments

Posted by: Dean Zimmerli

Commercial real estate investments have long been attractive to investors in Minnesota and around the country. Historically, only a very limited subset of the population was actually able to invest in commercial real estate because of the large buy-ins required to do so.

In 2012, the JOBS Act was passed by Congress. Meant to stimulate the economy, this law did many things, among them removing some of the restrictions on the advertising of securities offerings. In response, crowdfunding for commercial real estate investments became an option. This turn of events has allowed people to buy into the commercial real estate investment market with as little as a few thousand dollars as opposed to the many thousands that were previously needed.

One disadvantage of crowdfunded investments in general that they are illiquid. However, they can provide the same benefits that traditional commercial real estate investments can. These advantages include the fact that the value of commercial real estate in general does not fall with inflation. Commercial real estate also tends to provide higher returns than other investment classes, and these investments provide numerous tax benefits as well when structured properly.

Crowdfunding can also have a positive impact on commercial development as well. Prospective developers of shopping malls, warehouses and other lower-grade commercial real estate developments may now have an additional source of capital. This can be important in light of restrictions being placed on commercial bank lending practices as well as the credit markets tightening in general. There are still restrictions on crowdfunding transactions, however, and developers and investors alike may want to have a particular one reviewed in advance by a business law attorney.

This information is general in nature and should not be construed as tax or legal advice.