When it comes to raising capital for real estate projects you are selling securities, so it’s important to be prepared by considering all available regulatory and legal options. One alternative to the more traditional 506(b) exemption that many real estate sponsors use is the Regulation Crowdfunding (Reg CF) exemption through a registered funding portal like Invown.
To begin, let’s define the two exemptions: the 506(b) exemption allows sponsors to raise an unlimited amount of money from accredited investors as well as from 35 non-accredited investors but without the ability to advertise. The Reg CF exemption allows sponsors to raise up to $5 million from both accredited and non-accredited investors with the ability to advertise if done through a registered funding portal.
Now, onto the three main reasons why a Reg CF exemption may be the better choice for real estate sponsors:
1. Increased accessibility: With a Reg CF exemption, companies can tap into a wider pool of potential investors, including non-accredited investors who may not have the financial means to qualify as accredited investors under the 506(b) exemption. This opens up the opportunity for smaller investors to get in on the action and potentially earn a return on their investment.
2. Lower barriers to entry: The process of using a Reg CF exemption is generally simpler and more streamlined than the 506(b) process, which can be more time-consuming and costly. This means that companies can more easily and affordably access the capital they need to get their real estate projects off the ground.
3. Greater transparency: Reg CF exemptions are subject to more stringent disclosure requirements, which means that companies must provide more detailed information about their business and financials to potential investors. This increased transparency can help build trust and confidence in the company and its ability to successfully execute its real estate project.
In conclusion, while the 506(b) exemption may be a more traditional method of raising capital for real estate sponsors, using the Reg CF exemption through a registered funding portal like Invown can offer increased accessibility, lower barriers to entry, and greater transparency for real estate projects. Additionally, working with a funding portal like Invown can provide valuable support and guidance throughout the process, helping companies to efficiently and effectively secure the necessary capital to bring their projects to fruition. As the future of the industry unfolds, it’s important not to overlook the benefits of using a Reg CF exemption through a trusted funding portal as a way to secure the necessary capital and bring your project to fruition.
Disclaimer: Invown is not a law firm or an attorney and is not qualified to provide legal advice. Any information provided by Invown should be taken as informational and educational in nature and should not be considered as legal advice. Invown is happy to consult with sponsors and offer advice on how to potentially structure a real estate deal, but ultimately it is the responsibility of the sponsor to seek proper legal counsel before entering into any agreements.